Imposition of an Output Tax on All Firms in a Competitive

question 108

Multiple Choice

Imposition of an output tax on all firms in a competitive industry will result in:

• A) a downward shift in each firm's marginal cost curve.
• B) a downward shift in each firm's average cost curve.
• C) a leftward shift in the market supply curve.
• D) the entry of new firms into the industry.
• E) higher profits for the industry as price rises.

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Definitions:

Rationalize

The process of attempting to logically justify behavior or attitudes that might otherwise be unacceptable or irrational.

Paraphrase

The act of rewording or rephrasing a text or statement to achieve clearer understanding without changing its original meaning.

Direction

Guidance or instructions on how to perform a task or reach a destination; also refers to the course along which someone or something moves.

Meaningless

Lacking in purpose, value, or significance.