Assume That the Government Levies a One-Time-Only Tax on Oil

Multiple Choice

Assume that the government levies a one-time-only tax on oil companies equal to a proportion of the value of the company's oil reserves. According to the neoclassical model, if firms face no financing constraints and also believe the tax will not be repeated, the effect of this tax on investment by these firms will be to:

A) decrease investment.
B) not affect investment.
C) increase investment.
D) decrease the rental price of capital but not change the cost of capital.