Exhibit 7-18 A typical firm in a perfectly competitive market

-In Exhibit 7-18,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 7-18 A typical firm in a perfectly competitive market
 
-In Exhibit 7-18,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 output along its short-run marginal cost curve B because it can do so at a lower cost than producing along its higher cost curves. The long-run adjustment will occur as new firms enter the market, driving down the market price, and causing the individual firm's profits to return to zero in the long run.

Exhibit 7-18 a Typical Firm in a Perfectly Competitive Market