Consider a constant cost perfectly competitive industry

Reference no: EM13732649

Consider a constant cost perfectly competitive industry which is initially in long-run equilibrium under current demand conditions. Assume that the number of firms in the industry is fixed at its current level ie: the number of firms cannot
be changed. Now suppose that the demand increases.
a) Assuming that the number of firms cannot be increased, describe the industry's new long-run equilibrium (output, price, profit) using a firm-industry diagram.
b) Show the change in producer surplus on your diagram. What does the increase in producer surplus represent?

Reference no: EM13732649

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