Resumen de A Tax Can Increase Profit of a Monopolist or a Monopoly-like Firm: a Fiction or Distinct Possibility?

Chin W. Yang, Hui Wen Cheng, Ching Wen Chi, Bwo-Nung Huang

• The purpose of this paper is to reexamine the long-held theory that a tax reduces profit under monopoly or monopoly-like market structure. To present the paradox, we expand the switching price elasticity theory developed by Greenhut-Hwang-Ohta to show that the after-tax profit may very well increase in a monopoly or a tight-knit cartel. The result show that after-tax profit can actually increase in a monopoly or monopoly-like market without resorting to conjectural variation or product quality often used in oligopoly. To verify the paradox, simple numerical examples and commonly-used mathematical demand functions are employed.