Consider a competitive market in long run equilibrium

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Consider a competitive market in long run equilibrium (all firms are identical with a U-shaped cost structure, there is free entry/exit in the market, and there are no other external price effects). Suppose the government imposes a fixed fee per year on all firms that wish to produce and sell in this market. What happens to: (i) the optimal scale of each firm; (ii) industry output; and, (iii) price in a long-run competitive equilibrium? Briefly explain/discuss.

Reference no: EM13733425

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