Long Run Profits in an Increasing-Cost Industry
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Suppose you own a home remodeling company. You are currently earning short run profits. The home remodeling industry is an increasing-cost industry. In the long run, what do you expect will happen to:
A) Your firm's cost of products? Explain.
B) The price you can charge for your remodeling services? Why?
C) Profits in home remodeling? Why?
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Solution Summary
My firm is making a short-run profit in an increasing-cost industry. What will happen to my costs, prices and profits in the long run?
Solution Preview
Because my firm is making an economic profit, I expect that in the long run, new firms will enter the industry. The effects will be:
A) The increase ...
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