In the long run, a tax placed on a perfectly competitive industry should have what effect on the entire market?

Question

Quizplus · Accepted Answer

A tax placed on a perfectly competitive industry increases the cost of production, which leads to an increase in the price of the product. As a result, buyers will reduce their consumption of the good, and the quantity demanded will decrease. This decrease in quantity demanded will, in turn, lead to a decrease in the total amount of the good sold in the entire market. Therefore, a tax placed on a perfectly competitive industry will have the effect of decreasing the total amount of the good sold in the market.

In the Long Run, a Tax Placed on a Perfectly