Consider a perfectly competitive, constant cost industry with identical firms and downward sloping demand. Firm costs have the typical shapes. The market is currently in long-run equilibrium with market price of $50 and each firm producing 300 units. The government introduces a per-unit tax of $1 paid by consumers. In and each firm produces units than before. the short run, the market price with the tax will the tax. A. increase by exactly $1; more B. increase by less than $1; more C. remain unchanged; the same. D. decrease by less than $1; fewer. E. decrease by exactly than $1; fewer.

Consider a perfectly competitive, constant cost industry with identical firms and downward sloping demand. Firm costs have the typical shapes. The market is currently in long-run equilibrium with market price of $50 and each firm producing 300 units. The government introduces a per-unit tax of $1 paid by consumers. In and each firm produces units than before. the short run, the market price with the tax will the tax. A. increase by exactly $1; more B. increase by less than $1; more C. remain unchanged; the same. D. decrease by less than $1; fewer. E. decrease by exactly than $1; fewer.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter10: Prices, Output, And Strategy: Pure And Monopolistic Competition

Section: Chapter Questions

Problem 6E

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Consider a perfectly competitive, constant cost industry with identical firms and downward sloping demand.
Firm costs have the typical shapes. The market is currently in long-run equilibrium with market price of $50
and each firm producing 300 units. The government introduces a per-unit tax of $1 paid by consumers. In
and each firm produces
units than before.
the short run, the market price with the tax will
the tax.
A. increase by exactly $1; more
B. increase by less than $1; more
C. remain unchanged; the same.
D. decrease by less than $1; fewer.
E. decrease by exactly than $1; fewer.

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