If a competitive firm has to pay a lump sum tax, it will produce less
Indicate whether the statement is true or false
False. A lump sum tax is not related to the amount of output produced. It will increase fixed cost and thus lower profit. However, marginal cost will not be affected, and the profit-maximizing quantity will stay the same.
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If there are economic profits in a monopolistically competitive industry, they will generally be competed away through the
A) manipulation of the demand curve. B) increasing advertising budgets of existing firms. C) entry of new firms. D) introduction of brand name products by existing firms. E) exit of existing firms.
In the standard 45-degree line expenditure model, the C + I line and the C line are parallel because,
a. all I is assumed to be autonomous. b. all I is assumed to be induced. c. consumption depends on disposable income. d. I rises with GDP at the same rate as C.