Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 4

Figure 1 shows the short-run and long-run adjustment process for a decreasing cost industry responding to an increase in demand. Draw a similar two-panel diagram,illustrating the response of a decreasing cost industry to a decrease in demand. Draw in the long-run supply curve. In the long run,will the price be higher or lower,compared to the initial price?
Figure 1 A Decreasing Cost Industry