In the short run, a tax placed on a perfectly competitive industry should

Name: In the short run, a tax placed on a perfectly competitive industry should
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Question

Quizplus · Accepted Answer

In the short run, the tax will increase the cost of production for the firms in the industry, causing a decrease in supply. This decrease in supply will result in a higher price for consumers and a lower quantity of the good sold. In the long run, firms may exit the industry, which could result in a further decrease in quantity supplied.

In the Short Run, a Tax Placed on a Perfectly