QUESTION 7 • Explain the ettect of an increase in demand in a perfectly competitive market in the short-run and in the long-run. • More specifically, explain the impact of demand increase on the firm profits and on the number of the firms operating in the market. • Discuss the main assumptions underlying these results. (Hint: You may use graphs to illustrate your answer.)

QUESTION 7 • Explain the ettect of an increase in demand in a perfectly competitive market in the short-run and in the long-run. • More specifically, explain the impact of demand increase on the firm profits and on the number of the firms operating in the market. • Discuss the main assumptions underlying these results. (Hint: You may use graphs to illustrate your answer.)

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 5CQQ

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Using the Diagram above, answer the following questions: (c) Suppose the market price of the good in the short-run is $9 per unit. What do you know about this firm’s short-run profits, TR, TC, FC, VC, and level of production given this information? What do you predict will happen in the long-run in this market? (Hint: describe verbally, with numerical reference points, what you know about these different measures.)
Discuss the long-term effects in a perfectly competitive market if an existing firm is making profits and also losses . Use appropriate graphs to illustrate your explanations.