Textbook Problem

Pretzel stands in New York City are a perfectly competitive industry in long-run equilibrium. One day, the city starts imposing a $100 per month tax on each stand. How does this policy affect the number of pretzels consumed in the short run and the long run?

a. down in the short run, no change in the long run

b. up in the short run, no change in the long run

c. no change in the short run, down in the long run

d. no change in the short run, up in the long run