Effect of specific tax on natural monopoly? Watch
I was wondering how you would illustrate the effect of a specific tax on a natural monopoly as a cost curve?
I have been consulting the below site for other forms of regulation:
However, it shows the effect of a specific tax on a monopoly with an upward sloping MC curve, rather than a natural monopoly.
I'd assume that the flat MC curve and downward sloping AC curve would both inflate, ultimately resulting in lower output and higher prices (therefore it wouldn't successfully alleviate the inefficiencies associated with the monopoly) but I'm not sure how to illustrate it.