Raju and Co. is operating in a perfectly competitive market. The Government imposed a unit tax of Rs. 2 on the supply of output. The company produced and sold 1000 units. Total tax paid by the company and the Impact on LRAC curve of the firm will be

2000, LRAC shifts upwards

The correct answer is Option 3: 2000, LRAC shifts upwards

Step 1: Calculate Total Tax Paid

• Unit tax = Rs. 2 per unit
• Total units produced and sold = 1000
• Total tax paid = 2 × 1000 = Rs. 2000

Impact on LRAC Curve:

A unit tax increases the cost of production for the firm.

This increased cost will lead to an upward shift of the Long-Run Average Cost (LRAC) curve.

The LRAC curve will shift upwards, reflecting the higher average cost at each output level.