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Encouraging a Monopoly to Social Efficiency

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If government wanted to encourage a monopoly to produce the socially efficient quantity, should it use a per-unit tax or per-unit subsidy? Explain how this tax or subsidy would achieve the socially efficient level of output. Among the various interested parties - the monopoly firm, the monopoly's consumers, and other taxpayers - who would support the policy and who would oppose it?

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If government wanted to encourage a monopoly to produce the socially efficient quantity, should it use a per-unit tax or per-unit subsidy? Why? Who would support it and who would oppose it?

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A monopoly maximizes its profits at a level of production below that which would be produced in a perfectly competitive market. To encourage the ...

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