Graph 14-8
-Refer to Graph 14-8.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximising firm in a competitive market, the figure in panel (b) is most likely to reflect long-run market:

Question

Graph 14-8 
-Refer to Graph 14-8.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximising firm in a competitive market, the figure in panel (b) is most likely to reflect long-run market:

Quizplus · Accepted Answer

Panel (b) shows an increase in market supply, which would lower the equilibrium price and quantity in the long run. This can occur due to new firms entering the market, existing firms expanding their production capacity, or technological advances increasing productivity. The firm in panel (a) will respond to the lower price by reducing its quantity supplied, but the overall market supply curve shifts outwards, leading to a lower equilibrium price and quantity. Therefore, the figure in panel (b) most likely reflects a change in market supply in the long run.