13. Envelope Curve III Consider a perfectly competitive increasing-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?

13. Envelope Curve III Consider a perfectly competitive increasing-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?

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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