| Question | 5. All donuts in Germany are produced by a competitive industry. There is free entry in the long run. All firms are identical and have the following total cost function were TC = q +64 where is output. Total demand is given by Q = 3520-10p where p is price. a. What is price, quantity produced per firm and number of firms in the long run for this industry? b. Suppose the government imposes a tax of 8 dollars per unit on each unit purchased by the consumer. What happens to price, units produced per firm and total number of firms in this industry in the long run. c. What are the effects of this tax on consumer surplus and tax revenue in the long run? d. What is the cost of this tax to society? |
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| Subject | economy |
