How does a profit tax affect a monopoly''s output and price

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Only Native American Indian tribes can run casinos in California. These casinos are spread around the state so that each is a monopoly in its local community. California Governor Arnold Schwarzenegger negotiated with the state's tribes, getting them to agree to transfer 10% of their profits to the state in exchange for concessions. How does a profit tax affect a monopoly's output and price? How would a monopoly change its behavior if the profit tax were 25% rather than 10%? (Hint: You may assume that the profit tax refers to the tribe's economic profit.)

Reference no: EM131345494

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