Minimum long run average total cost

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Suppose the restaurant industry is perfectly competitive and all producers have identical cost curves. The industry is currently at a long-run equilibrium, with each firm producing at its minimum long run average total cost of $8.

a) If there is a sudden increase in demand for restaurant meals, what will happen to the price of restaurant meals? How will individual firms respond to this?

b) In the market as a whole, will the change in equilibrium quantity be greater in the short run or the long run? Explain.

c) Will the change in output on the part of individual firms be greater in the short run or the long run? Explain.

Reference no: EM132138025

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