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If a Regulatory Agency Imposes a Lump- Sum Tax on a Monopolist

Question 64

Multiple Choice

If a regulatory agency imposes a lump- sum tax on a monopolist (i.e.,a tax that is independent of the level of output) it will reduce the firm's profits because the tax increases


A) both the LRAC and the MC,leaving price and output unchanged.
B) all costs as it shifts the demand curve to the right.
C) all costs as it shifts the demand curve to the left.
D) price whereas quantity demanded falls.
E) the LRAC but not the MC,leaving price and output unchanged.

Correct Answer:

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