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In: Economics

assume that a perfectly competitive ,constant cost industry is in a long run equilibrium with 20...

assume that a perfectly competitive ,constant cost industry is in a long run equilibrium with 20 firms .

each firm is producing 150 units of output which it sells at the price of R 20 per unit ,out of this amount each firm is paying R 4 tax per unit of the output .the government decide to abolish the tax

a)Explain what would happen in the short run to the equilibrium price and industry output,number of firms in the industry ,output and profit of each firm. illustrate on diagrams for the market and a particular firm.

b)Explain what would happen in the long to the equilibrium price and industry output ,number of firms in the industry ,output and profit of each firm .illustrate on diagram for the market and a particular .compare both to the initial long run equilibrium and to the short run equilibrium .

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