Question
The prompt reads Suppose the government places a sales tax on firms in a monopolistically competitive industry that is in a long-run equilibrium. a. Draw
The prompt reads "Suppose the government places a sales tax on firms in a monopolistically competitive industry that is in a long-run equilibrium. a. Draw a diagram showing the marginal cost, average total cost, marginal revenue, and demand curves before the sales tax. Label the equilibrium price and quantity. b. On the same diagram, show the marginal cost, average total cost, marginal revenue, and demand curves after the sales tax is in place. Label the new price and quantity."
Is it correct to interpret the changes asked for in part b should be that all parts just move a lower quantity due to the addition of the sales tax? So the demand curve shifts to the left and etc.
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