Suppose the government imposes an excise tax of $10 per pair of shoes, but simultaneously launches a program of giving a gift of $10,000 per year to each shoestore.
a. In the short run, what happens to the price of shoes, the number of shoes sold in total, and the number of shoes at any particular shoestore?
b. Suppose that by coincidence, the long-run effect of the two programs combined is to return the price of shoes right back to its original level. In the long run, what happens to the number of shoes sold in total, the number sold at any given store, and the number of stores in the industry?