Exhibit 7-10 Long-run perfectly competitive industry

-Refer to Exhibit 7-10 and 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 7-10 Long-run perfectly competitive industry
 
-Refer to Exhibit 7-10 and 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

When the demand curve shifts from D₁ to D₂, the price will increase from P₁ to P₂. This will induce firms to enter the industry, causing the market supply to shift to the right until it intersects the new demand curve at point C. In the long run, the industry will reach a new equilibrium at point C, where P = minimum ATC and firms earn zero economic profit. Therefore, the long-run supply curve will shift from point A to point C.

Exhibit 7-10 Long-Run Perfectly Competitive Industry