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Suppose a typical firm in a competitive industry has the following data in the short run: price = $4000; output = 1 million units; ATC = $4000; AVC = $3500. What will likely happen in the long run?
1. There is not enough information to formulate an answer.
2. The size of the industry will remain the same in the long run.
3. The typical firm would shut down, until the remaining firms have a higher price.
4. In the long run the industry will expand because firms are earning economic profits.
5. In the long run the industry will contract because firms are suffering losses.
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