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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Suppose the government imposes the following production tax on one perfectly competitive firm in an industry: For each unit the firm produces, it must pay $1 to the government. Will consumers in this market end up paying higher prices because of the tax? Why or why not?

To determine

Effect of imposing tax on product of perfectly competitive firm and changes in consumer’s consumption behavior.

Explanation

The perfect competition is the market structure with more number of buyers and sellers selling homogeneous products. Imposition of tax increases the price of the product. Generally, when the price is increases, consumers are reluctant to consume that product...

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