Exhibit 8-18 A typical firm in a perfectly competitive market
-In Exhibit 8-18, assume the perfectly competitive firm is in long-run equilibrium and there is an increase in demand. As a result, the firm in the short run will increase output along its:

Question

Exhibit 8-18 A typical firm in a perfectly competitive market 
-In Exhibit 8-18, assume the perfectly competitive firm is in long-run equilibrium and there is an increase in demand. As a result, the firm in the short run will increase output along its:

Quizplus · Accepted Answer

In the short run, the firm will increase its output along the short-run marginal cost curve B, as this represents the lowest possible cost for producing additional units of output. The firm will only consider adjusting its long-run average cost curve in the long run, when it has time to adjust its inputs and production process. The firm will not shut down in response to an increase in demand, as long as the price it receives for its output is greater than its average variable cost.

Exhibit 8-18 a Typical Firm in a Perfectly Competitive Market