Assume the smart watch industry is a perfectly competitive industry that uses a specialized input. If this industry experiences an increase in demand, we might expect that in the long run:

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In a perfectly competitive industry with a specialized input, an increase in demand will lead to higher output prices in the short run. In the long run, as firms enter the market, the demand for the specialized input will increase, causing its price to rise as well. Thus, both input and output prices will increase.

Assume the Smart Watch Industry Is a Perfectly Competitive Industry