Determine the effects of the tax

Reference no: EM1369315

Assume that gasoline retailing industry is perfectly competitive, constant expenses, and in long run equilibrium. If the government unexpectedly levies a 5-cent tax on every gallon sold by gasoline retailers, depict what will the effects of the tax be in the short run on industry out puts and price? Will the price rise by the full five cents in the short run? In the long run? How would your answer change if the industry was increasing cost?

Reference no: EM1369315

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