2. Consider a perfectly competitive market at a long-run equilibrium. The industry has 100 firms that sell 100 units each at a price of $20. (a) Illustrate both the entire market (supply/demand diagram) and the individual firm (cost/revenue diagram) at long-run equilibrium. (b) Suppose a decrease in consumer demand occurs, which reduces the total quantity sold on the market by 1000 units. Illustrate the effect this decrease in demand would have on both the market and the individual firm, showing also the response of supply. (c) Suppose the market now supplies 3000 units. How many firms exited the market?

Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter22: Perfect Competition
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2. Consider a perfectly competitive market at a long-run equilibrium. The industry has 100 firms
that sell 100 units each at a price of $20.
(a) Illustrate both the entire market (supply/demand diagram) and the individual firm
(cost/revenue diagram) at long-run equilibrium.
(b) Suppose a decrease in consumer demand occurs, which reduces the total quantity sold
on the market by 1000 units. Illustrate the effect this decrease in demand would have on
both the market and the individual firm, showing also the response of supply.
(c) Suppose the market now supplies 3000 units. How many firms exited the market?
Transcribed Image Text:2. Consider a perfectly competitive market at a long-run equilibrium. The industry has 100 firms that sell 100 units each at a price of $20. (a) Illustrate both the entire market (supply/demand diagram) and the individual firm (cost/revenue diagram) at long-run equilibrium. (b) Suppose a decrease in consumer demand occurs, which reduces the total quantity sold on the market by 1000 units. Illustrate the effect this decrease in demand would have on both the market and the individual firm, showing also the response of supply. (c) Suppose the market now supplies 3000 units. How many firms exited the market?
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