Using relevant diagrams, describe the effect of the introduction, in a competitive market, of a recurring lump-sum tax collected on the firms:

1. In the short run: on the market (market price, quantities, number of firms) and on the firms (changes in cost curves, output, prices, profits).

2. In the long run: on the market (market price, quantities, number of firms) and on the firms (changes in cost curves, output, prices, profits). What would happen if the tax was paid once only instead?