(a) Suppose the market for protective masks is perfectly competitive and initially in long-run equilibrium. Describe and illustrate that equilibrium.

(b) Now suppose that demand for masks suddenly and unexpectedly increases. Describe and illustrate the new short-run equilibrium that will result.

(c) Will the equilibrium you described in part (b) persist in the long-run? Explain.

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a The industry is said to be in longrun equilibrium when a price is reached at which all firms are in equilibrium and produce at the bottom of their LAC curve to make regular profits Under these condi... View the full answer