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Question: Consider a perfectly competitive, constant-cost industry.
(a) Draw the long run market diagram with both the short run and long run supply curves. Explain the short run and long run producer surplus as found in this diagram.
(b) Now draw the long run market diagram for a perfectly competitive, increasing-cost industry with both the short run and long run supply curves. Explain the short run and long run producer surplus as found in this diagram.
(c) What are the differences in your diagram? Explain why we do (or don't) see these differences.
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