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    Socially desirable method of taxing monopolists

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    It has been proposed that natural monopolists should be allowed to determine their profit maximizing outputs and prices and then government should tax their profits away and distribute them to consumers in proportin to their purchases from the monopoly. Is this proposal as socially desirable as requiring monopolists to equate price with marginal cost or average total cost?

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    No, the proposal does not consider that the output of the natural monopolist would still be at the suboptimal level where P > MC. Too ...

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    The solution provides explanations and answer for a socially desirable method of taxing monopolists.