Suppose a Proportional Tax Is Imposed on a Monopolist's Profits

Multiple Choice

Suppose a proportional tax is imposed on a monopolist's profits. Relative to the pretax situation, the monopolist will:

A) produce the same output and charge the same price as before the tax.
B) encourage new firms to enter and share the tax burden.
C) produce less, decreasing TC.
D) produce the same output, increase the price, and pass the tax to consumers.