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(Perfect Competition in the Long Run) Draw the short- and long-run cost curves for a competitive firm in long-run equilibrium. Indicate the long-run equilibrium price and quantity. a. Discuss the firm’s short-run response to a reduction in the price of a variable resource. b. Assuming that this is a constant-cost industry, describe the process by which the industry returns to long-run equilibrium following a change in market demand.

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ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536
BuyFind

ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536

Solutions

Chapter
Section
Chapter 8, Problem 6.13P
Textbook Problem

(Perfect Competition in the Long Run) Draw the short- and long-run cost curves for a competitive firm in long-run equilibrium. Indicate the long-run equilibrium price and quantity.

a. Discuss the firm’s short-run response to a reduction in the price of a variable resource.

b. Assuming that this is a constant-cost industry, describe the process by which the industry returns to long-run equilibrium following a change in market demand.

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