Answer to Question #125510 in Microeconomics for mamoona

Question

What is the effect of a lump-sum tax (which is like an additional
fixed cost) on a monopoly? (Hint: Consider the possibility that the firm may shut down)

Answer 1

In the short​ run, a​ lump-sum tax does not affect the​ monopoly's profit maximizing quantity if it produces and does not affect the​ monopoly's likelihood of shutting down.

While In the long run, a lump-sum tax does not affect the monopoly's profit max quantity if it produces and increases the monopoly's likelihood of shutting down