Competitive Long Run Equilibrium
Not what you're looking for?
Using diagrams for both the industry and a representative firm, illustrate competitive long run equilibrium. Assuming constant costs, employ these diagrams to show how (a) an increase and (b) a decrease in market demand will upset the long-run equilibrium. Trace graphically and describe verbally the adjustment processes by which long-run equilibrium is restored. Now rework your analysis for increasing and decreasing-cost industries and compare the three long run supply curves.
Level - MBA
Purchase this Solution
Solution Summary
Illustration of competitive long run equilibrium and how changes is demand will affect it.
Solution Preview
In a constant cost industry, average cost doesn't change as the industry expands. This happens if the industry consumes only a small amount of the input available, meaning that increases or decreases in output - do not affect the price of the input. As a result, the average cost of production for the typical firm doesn't change as the industry grows. The long-run supply curve for such an industry is horizontal at the constant average cost of production. At a lower prices, the quantity supplied would be zero because no rational firm would sell at less than the cost of production; at higher prices, firms would enter the industry until the price dropped to the ...
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.