Consider a perfectly competitive constant-cost industry with n identical firms. Startis from long run industry equilibrium, use diagrams for the market and for a representa firm to illustrate the effect of a one-time, unexpected, permanent increase in the price of an important variable input. a. Show the short run equilibrium (in both diagrams) after the increase in demand. b. Show the long run equilibrium (in both diagrams). c. What happens to price in the short run? In the long run? d. What happens to the quantity sold by the firm in the short run? In the long run? q. What happens to profit in the short run? What is the industry response? What happens to profit in the long run? f. What happens to the number of firms in the short run? In the long run?

Consider a perfectly competitive constant-cost industry with n identical firms. Startis from long run industry equilibrium, use diagrams for the market and for a representa firm to illustrate the effect of a one-time, unexpected, permanent increase in the price of an important variable input. a. Show the short run equilibrium (in both diagrams) after the increase in demand. b. Show the long run equilibrium (in both diagrams). c. What happens to price in the short run? In the long run? d. What happens to the quantity sold by the firm in the short run? In the long run? q. What happens to profit in the short run? What is the industry response? What happens to profit in the long run? f. What happens to the number of firms in the short run? In the long run?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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