Suppose a Cell-Phone Service Provider Has Monopoly Rights for a Geographical

Multiple Choice

Suppose a cell-phone service provider has monopoly rights for a geographical region and is earning monopoly profits.If the government then imposes a lump-sum tax (i.e.,a tax that is independent of the level output) of $X on this firm,the effect is

A) an increase in consumer surplus due to the tax revenue.
B) to increase the firm's marginal costs and reduce its profit by $X.
C) to increase the firm's average costs and reduce its profit by $X.
D) a reduction in output and an increase in price.
E) an increase in output and a decrease in price.