Question: Consider a perfectly competitive industry. (a) Explain using words and a fully-labelled diagram why a firm may continue to operate in the short-run if it

Consider a perfectly competitive industry.

(a) Explain using words and a fully-labelled diagram why a firm may continue to operate in the short-run if it is making an economic loss.

[7 marks]

(b) Explain in words what will happen in the long-run to market supply and/or demand, equilibrium price and quantity if many firms are making economic profits. (3 marks)

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