Figure 7.12
-Refer to Figure 7.12.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?
A) Panel A
B) Panel B
C) Panel C
D) Panel D

Question

Figure 7.12 
-Refer to Figure 7.12.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Quizplus · Accepted Answer

In the long run, firms will exit the industry, reducing the supply and shifting the supply curve to the left. This will lead to an increase in the equilibrium price and quantity, as shown in Panel A.

Figure 7.12 -Refer to Figure 7.12.Consider a Typical Firm in a Perfectly