A monopolist has an inverse demand curve given by p(y) = 12 - y and a cost curve given by
c(y) = y2.
(a) What will be its profi t maximizing level of output?
(b) Suppose the government decides to put a tax on this monopolist so that each unit it sells is has to pay the government $2. What will be its output under this form of taxation?
(c) Suppose now that the government decides to put a lump sum tax of $10 on the pro ts of this monopolist. What will be its output?