Starting from an equilibrium condition, consider an increase in income in a perfectly com-petitive market with a normal good. (a) Draw the MC, ATC and price level on the same graph before and after the change in income. (b) What will happen to the number of firms in the long-run? (c) If the number of firms change, what will happen to the short-run supply curve? (d) What’s the long-run production and price level. (e) Draw the long-run supply curve.
Starting from an equilibrium condition, consider an increase in income in a perfectly com-petitive market with a normal good. (a) Draw the MC, ATC and price level on the same graph before and after the change in income. (b) What will happen to the number of firms in the long-run? (c) If the number of firms change, what will happen to the short-run supply curve? (d) What’s the long-run production and price level. (e) Draw the long-run supply curve.
Chapter3: Market Demand And Supply
Section: Chapter Questions
Problem 6SQ
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Starting from an equilibrium condition, consider an increase in income in a perfectly com-petitive market with a normal good.
(a) Draw the MC,
(b) What will happen to the number of firms in the long-run?
(c) If the number of firms change, what will happen to the short-run supply curve?
(d) What’s the long-run production and price level.
(e) Draw the long-run supply curve.
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