A government increases the tax rate on corporate profits. According to the standard model where the intensity of market competition remains unchanged, this policy will cause the price-setting curve to shift upwards because firms will increase their prices to maintain their after-tax profit levels.
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A government increases the tax rate on corporate profits. According to the standard model where the intensity of market competition remains unchanged, this policy will cause the price-setting curve to shift upwards because firms will increase their prices to maintain their after-tax profit levels.