+4 votes
asked ago in General Economics Questions by (160 points)
an infra-marginal producer may earn rent due to its superior characteristics (location, access to superior inputs etc). In principle we should be able to tax that rent at almost any rate without affecting the producer's behaviour. But if the producer has some economic power it should be able to retaliate, lift prices and get back at least some of the rent tax.

1 Answer

0 votes
answered ago by (2.7k points)
I agree with you and right now I'm thinking if a anti-trust fine would make them operate in the same way. If this is the way they operate, with a higher position on the closed market, I think the only path to increase the progress of the industry is tax them producing a loss in their business. It's something that can open a hole in the market during their introduction of technological advances or improvements in allocation or productivity to reverse the losses, that can permit another companies to enter in the market, because the production will be disminished by obligation until they find a better position on their own controlled market.