Problem 1: A Tax 8: Perfect Competition [11 points] Suppose that we exist in a perfectly competitive industry, and we begin in long-run equilibrium. The cost curves are as below. C p I E 8 samc 5 misc p Avc M\" MC D Ci _ c: Now suppose that the government also implements a $10 excise [per unit] tax on the producers in this market. 1] What will happen to shortrun prots for firms in this market? Draw what happens to the market price and show what happens to firm prots using supply and demand and the cost curves similar to the figures above. [hintz in the short-run, you will want to use the shortrun supply curve, not the long-run supply curve.] [3 points] 2] What would need to happen forrms to begin to exit in the shortrun? Show this visually using using supply and demand and the cost curves. Show an example where rms would not be exiting on the short-run. [3 points] 3] What will happen to the market price and the number of rms in the longrun as a result of this tax? Show this visually using using supply and demand and the cost curves. [3 points] 4] Who ends up paying the incidence of this tax in the long-run [buyers or sellers]? [2 points]