16LRSupplyHandout - 1 Long Run Industry Supply Long Run...

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Unformatted text preview: 1 Long Run Industry Supply Long Run Industry Supply u LR equilibrium u p = min LRATC u LR industry supply curve perfectly elastic at p=min LRATC u the number of firms changes to meet demand at min LRATC S LR Firm Q ($) MC AVC ATC Market Q P D P Firm Market S A D ¢ B P ¢ (LR) S ¢¢ C- constant-cost u SR - equilibrium p › , Q › ; firm Q › with profits u LR – entry u SR supply increases, equilibrium p fl , profits fl Firm Q ($) MC Market Q D P Firm Market S SR D ¢ A P ¢ B u demand increases External Diseconomies of Scale External Diseconomies of Scale ATC P Firm Q ($) MC Market Q D P S SR D ¢ A P ¢ B External Diseconomies of Scale External Diseconomies of Scale u entry u with growth in the industry, firm’s costs increase u firm’s AVC, ATC, MC shift up u S SR increases Firm Market (LR) (LR) (LR) (LR) ATC P 2 u LR equilibrium u p = min LRATC S LR MC ¢ ATC ¢ Firm Q ($) MC Market Q D P S SR D ¢ A P ¢ B External Diseconomies of Scale External Diseconomies of Scale Firm Market...
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This note was uploaded on 03/12/2010 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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16LRSupplyHandout - 1 Long Run Industry Supply Long Run...

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