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The long-run supply curve for a good is a horizontal line at a price $3 per unit of the good. The demand curve for the good is QD = 50-2P.
(a) What is the equilibrium output of the good?
(b) A $1 excise tax is imposed on the good. What will be the long-run effect on the equilibrium output of the good? Explain.
(c) Shortly after the tax is imposed, a unit of the good can be purchased for $3.60. Is this the long-run equilibrium price? Explain.
What are some of the ethical dilemmas encountered by traders in their pursuit of profits for both their company and themselves?
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