Consider the following possible schemes for taxing a monopoly:
(i) A proportional tax on profits
(ii) A tax on each unit produced
(iii) A proportional tax on the gap between price and marginal cost
(a) Explain how each of these taxes would affect the monopolist's profit-maximizing output choice. Would the tax increase or decrease the deadweight loss from monopoly?
(b) Graph your results for each of these taxes.