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AP® Microeconomics

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Perfect Competiton: Impact of Lump-Sum Tax on Short-Run Quantity

APMICR-2OM4LQ

If a perfectly-competitive firm is currently producing the profit-maximizing output, which of the following describes the short-run impact on the output of the firm if the government imposes a lump-sum tax?

A

Short-run output will decrease.

B

Short-run output will increase.

C

Short-run output will not change.

D

Short-run output will decrease if the tax is greater than total fixed costs.

E

Short-run output will increase if tax is greater than total variable costs.