1. Tax incidence in the long- and short-run Consider a perfectly competitive constant-cost industry in long-run equilibrium, which produces toothbrushes that currently sell at an equilibrium price of $2.00 each. a. The government introduces a tax of $0.50per toothbrush; the proceeds are to be used for “dental education.” Explain, with the aid of appropriate diagrams (for both a typical firm, and the industry) why, in the short-run, the price …
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