Question: Consider a monopoly with a horizontal marginal cost schedule. If a tax t is imposed on the monopolist, show that:
(a) Price increases by exactly half the tax if the monopolist faces a linear demand curve p = a - bQ.
(b) Price increases by a multiple [1/(1 -/eta^d)] if the monopolist faces a demand schedule with constant elasticity eta^d. In both cases, provide also a graphical representation.