Answer to Question #48533 in Microeconomics for Yoyo
Assume a perfectly competitive industry where the firms are identical, each with U-shaped short run and long run average cost curves. In the short run, consumers bear none of the burden of a “per firm” tax, while in the long run, consumers bear the entire burden. Explain why the statement is True, False, or Uncertain according to economic principles.
The statement is True. In the short run consumers bear none of the burden of a per firm tax because actually firms could not implement tax in price as long as demand is very elastic.
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