Consider perfectly competitive constant cost industry with identical firms that have the same U-shaped run AC and linear MC. Assume linear downward sloping demand. Suppose that initially this industry is the LR equilibrium. that, a per-unit sales subsidy

Consider perfectly competitive constant cost industry with identical firms that have the same U-shaped\nlong run AC and linear MC. Assume linear downward sloping demand. Suppose that initially this industry is\nin the LR equilibrium.\nSuppose that, a per-unit sales subsidy of size s (s is much smaller than the current market price) is\nintroduced.\nExplain intuitively why the new equilibrium allocation is not efficient under the assumption that new\nfirms cannot enter this industry.\nNow, assume that new firms may enter. Do you anticipate that the resulting value of DWL will be\nthe same/bigger/smaller in comparison with blockaded entry case?\nSketch a graph and illustrate the value of DWL under blockaded entry and under free entry.\nSuppose that government decided to provide the per unit subsidy to the 50% of the firms that operated\nat the market before the introduction of the subsidy. These firms are chosen randomly. Suppose that entry\nis blockaded and the size of the subsidy is chosen in such a way that total sales are the same as in (ai). Will\nthe resulting DWL be the same/bigger/smaller than DWL in (ai)? Explain intuitively, no calculations are\nexpected