demand from Di to D2. of a one-time, unexpected, permanent increase in market 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? e. 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?
demand from Di to D2. of a one-time, unexpected, permanent increase in market 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? e. 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?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 5PA
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![12. Envelope Curve II
Consider a perfectly competitive constant-cost industry with n identical firms. Starting
from long run industry equilibrium, use diagrams for the market and for a representative
firm to illustrate the effect of a one-time, unexpected, permanent increase In market
demand from Di to D2.
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?
e. 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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1f061069-91e6-48ee-985f-f8d5b158cf5c%2F59218197-9bc1-48cf-b8db-c1e750d460b5%2F3y7fav8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:12. Envelope Curve II
Consider a perfectly competitive constant-cost industry with n identical firms. Starting
from long run industry equilibrium, use diagrams for the market and for a representative
firm to illustrate the effect of a one-time, unexpected, permanent increase In market
demand from Di to D2.
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?
e. 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?
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