Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 4

Suppose that the government has decided to tax all the firms in a monopolistically competitive industry by levying a fixed tax on each firm; that is,the amount of the tax is the same regardless of how much output the firm produces. In the short run,how would the tax affect the price,output level,and profit of a typical firm in that industry? What would be the effect in the long run?