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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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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