Suppose the required assumptions for a perfectly elastic long run supply curve hold for the widget industry.
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Question:
Suppose the required assumptions for a perfectly elastic long run supply curve hold for the widget industry. Each widget firm has the cost structure illustrated in the left graph. The right graph illustrates two different possible demand curves for widgets, D1 and D2. Suppose the industry is initially in long-run equilibrium at demand D1 and the number of firms equals the number in the previous question. Demand then shifts to D2. In the short-run, the equilibrium price will be
$22
$15
$20
$18
$26
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