--%>

Question based on placing sales tax in long-run equilibrium

A competitive industry is in long-run equilibrium. Then a sales tax is placed on all firms in the industry. What do you suppose to happen to the price of the product, the number of firms in the industry, and the output of every firm?
Along with the imposition of sales tax on all of the firms, the marginal cost curve for each firm will shift up and to the left by the amount of the tax, and consequently the market supply curve shifts up and to the left. The shift supply curve will increase the price of the product and decrease the quantity supplied by each firm, in the market. In the short run firms will continue to generate as long as price is above average variable cost. In the long run, some firms might exit if price falls below the new long run average cost curve that has shifted up by the amount of the tax. As firms exit, the supply curve will shift up and to the left, resulting in higher price and lower quantity supplied.

   Related Questions in Biology

  • Q : Assignment of a newly discovered protein

    Q1. How to reviewed assignment of a newly discovered protein based on its sequence or structure to an exiting protein family.

  • Q : Plan of Implementation-Six Sigma Plan

    Plan of Implementation: Increasingly operations have become more complex all over the world. This is a result of more use of technology all over the world. With this increased use of technology in operations, the records of work are more important. Th

  • Q : Main functions of spleen-Total

    Write down the main functions of spleen? Why is a total splenectomy (or surgical removal of the spleen) compatible with life?

  • Q : Biological function of connective

    What is characteristic biological function of connective tissues? How is this function allocated to the major features of its cells?

  • Q : Autophagic intracellular digestion

    Elucidate autophagic intracellular digestion? Why is this kind of intracellular digestions intensified in an organism undergo starvation?

  • Q : Is the ventricle lumen bigger in systole

    Is the ventricle lumen bigger in systole or for the period of diastole?

  • Q : Consumption of molecular oxygen Why the

    Why the consumption of molecular oxygen point out the metabolic rate of aerobic organisms?

  • Q : IT strategy is done in isolation Some

    Some organisations believe that it is solely the responsibility of the board of directors to develop top level strategy. And similarly, IT strategy should be developed by the IT department.  Nothing could be further than the truth. Although strategy calls for som

  • Q : Does eukaryotic cell contains one

    Does each and every eukaryotic cell contain nucleus and just one nucleus?

  • Q : Define Sort code Define Sort code: The

    Define Sort code: The system sorts the line items in according to the content of the sort key described in the GL master. For instance: In a customer recon. Account