Question

For a monopoly that practices first-degree price discrimination, how would a one dollar per-unit tax affect the monopoly’s output, consumer surplus, producer surplus, and total surplus? a graph would be helpful

Answer 1

In the perfect price discrimination the monopolist firm charges the maximum possible price for their product, that is they charge the maximum willingness to pay for the each consumer , so there won't be any consumer surplus. There is only producer surplus , the total surplus is the sum of both the producer and consumer surplus since there is no consumer surplus the total surplus equals the producer surplus plus the dead weight loss of the taxes.

So tax will reduce the produce surplus and creates a dead weight loss, overall there is a decline in the total surplus.