The incidence of which of the following will entirely be on the monopolist?
A Lump-sum tax raises fixed cost without changing marginal cost, so the surviving profit-maximising monopolist keeps the same price/output and absorbs the tax in profit.…
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The incidence of which of the following will entirely be on the monopolist?
Answer and explanation
Correct answer A
A Lump-sum tax raises fixed cost without changing marginal cost, so the surviving profit-maximising monopolist keeps the same price/output and absorbs the tax in profit. Specific tax changes marginal cost and may be partly shifted to buyers. Regulated monopoly pricing is not itself this fixed tax. None of these is wrong because lump-sum tax fits.
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UGC NET Economics