Assume a perfectly competitive firm with its corresponding Marginal Revenue (MR), Average Total Cost (ATC), Average Variable Cost (AVC) and Marginal Cost (MC). Assume that the firm produces limestone.The Government decides to impose a tax on units of limestone produced by the perfectly competitive firm. The firm makes a profit before the tax imposition and it is expected to make a profit even after the imposition of ta by the Government.

(a)Illustrate graphically and discuss (with Output on the horizontal axis) how the tax shifts the corresponding curves.

(b)Using the diagram produced in (a), determine the before-tax and after-tax equilibria and the amount by which the firm adjusts its output