If a firm is currently in short-run equilibrium earning a profit, what impact will a lump-sum tax have on its production decision?
A) The firm will decrease output to earn a higher profit.
B) The firm will increase output but earn a lower profit.
C) The firm will not change output but earn a lower profit.
D) The firm will not change output and earn a higher profit.
C
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The corn market is perfectly competitive, with thousands of corn farmers. In the 2000s, the price of corn soared so that new farmers entered the corn market
Initially, entry ________ the economic profit of the initial corn farmers and in the long run the initial corn farmers ________. A) increased; made an even greater economic profit than initially B) decreased; made zero economic profit C) increased; made zero economic profit D) decreased; incurred an economic loss E) increased; made an economic profit
People buy insurance
a. because they are risk averse. b. to defer consumption. c. because of externalities. d. to maximize their welfare. e. to ensure against poor health.