Exhibit 7-19 Long-run perfectly competitive industry

As shown in Exhibit 7-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D₁ to D₂. The result is a long-run supply curve drawn from point:

Question

Exhibit 7-19 Long-run perfectly competitive industry

As shown in Exhibit 7-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D₁ to D₂. The result is a long-run supply curve drawn from point:

Quizplus · Accepted Answer

In the long-run, firms in a perfectly competitive industry will enter or exit until the industry is in equilibrium where P = MC = minimum ATC. At point A, this condition is satisfied and the industry is in long-run equilibrium. When the demand curve shifts from D₁ to D₂, the equilibrium price will increase from P1 to P2. This will incentivize firms to enter the industry in the long-run, which will shift the supply curve to the right. The new long-run supply curve will pass through point C, which represents the new equilibrium where P = MC = minimum ATC. Therefore, the long-run supply curve will shift from AS1 to AS2, passing through point A and ending at point C. The correct choice is D.

Exhibit 7-19 Long-Run Perfectly Competitive Industry