Question 3.16 asked about the effect of imposing a specific tax on a perfectly competitive industry when entry into the industry is limited. If entry were instead unlimited, how would the market and firm equilibria change in the long run when a specific tax is imposed?

Data From Question 3.16:-

About two-third of the world's wine is produced in Europe. France, Italy, and Spain account for almost half of all the wine produced in the world. Except for France, none of the top 10 wine-producing countries in Europe levy an excise (per-unit) tax on still wine, and France's excise tax is very small (about \(€ 0.038\) per liter). If the wine industry were perfectly competitive, explain what effect a significant excise tax in France would have on the longrun supply curve for wine from those two countries when the entry of firms is limited. (Hint: See Solved Problem 8.4 and the Application "Upward-Sloping Long-Run Supply Curve for Cotton.")