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Draw graphs showing a perfectly competitive firm and industry in long-run equilibrium.
A. How do you know that the industry is in long run equilibrium?
B. Suppose that there is an increase in demand for this product. Show and explain the short-run adjustment process for both the firm and the industry.
C. Show and explain the long-run adjustment process for both the firm and the industry. What will happen to the number of firms in the new long-run equilibrium?
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Illustrate what will the level of output and price in the long run if this industry were perfectly competitive.
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