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    Question

    lumpsum tax is levied on the monopolist, the burden will be borne by

    A Consumers only Correct Answer Incorrect Answer
    B Monopolist only Correct Answer Incorrect Answer
    C Consumers and Monopolist jointly Correct Answer Incorrect Answer
    D Either consumers or producers Correct Answer Incorrect Answer

    Solution

    A lumpsum tax on the monopolist or a percentage of the monopoly net revenue is like a fixed cost to a monopolist. It will lead to rise in the total cost. (Shift in average cost curve, marginal cost curve will remain same). As a result, equilibrium point and the equilibrium price-output combination would also remain unaffected by the tax. The profit of the monopolist would now fall, causing a redistribution of incomes. It will be borne by the monopolist and is not shifted to the consumer.

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