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    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 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 ...

    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?