Does anyone know any book in which I can read and see graphs about the ad valorem or specific tax in monopolies or perfect competition? I need a graph like this with the explanation but i can't find it in pindyck and varian they only talk about specific tax.




1 Answer 1


When a specific tax is imposed on a monopolist, the supply curve doesn't apply since a monopolist does not have a supply curve in the traditional sense. Instead, the monopolist sets the price and quantity to maximize its profit. The tax increases the monopolist's cost of production. After tax imposition the demand curve rotates inward direction, and marginal revenue curve MR1 and MR2 also rotates inward direction. After tax imposition quantity demanded fall which rise he price level and overall profit rise of monoplistic firm.


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