Question

Consider a perfectly competitive firm currently producing X1 units of a good. Now suppose that the...

Consider a perfectly competitive firm currently producing X1 units of a good. Now suppose that the government levies a tax on economic profits of the firm (for example, 10% of its profits are taxed). If the firm’s after-tax production level is X2, compare X1 and X2. How much of this tax is paid by the consumers?

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