ECON

[mambovipi]

Can someone please explain the impact of a perfectly competitive increasing-cost industry, on demand, output, supply & prices in the long run.

Thanks



Edited 1 time(s). Last edit at Monday, June 2, 2008 at 12:37PM by mambovipi.

 

[jo_l]

perfectly competitive = perfectly elastic demand curve.

output = MR = D = MC

 

[mambovipi]

Let me rephrase the q:

In perfectly competitive increasing-cost industry what is the most likely long-run effect of a permanent increase in demand?

What is the effect on prices, output & supply?



Edited 1 time(s). Last edit at Monday, June 2, 2008 at 01:04PM by mambovipi.

 

[mcf]

Isn't there no impact. The demand curve in perfect competition is horizontal. An increase in demand will not move that curve... price, quantity, and output wouldn't move. But this doesn't feel right. Can someone explain (graphically)?

 

[mambovipi]

that's what I thought, but apprently the supply curve changes from inelastic to upward sloping which increases prices... I don't quite understand that.... Explanations please

 

[mambovipi]

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