Problem: Draw graphs showing a perfectly competitive firm and industry in long-run equilibrium.
1) How do you know that the industry is in long-run equilibrium?
2) Suppose that there is an increase in demand for this product. Show and explain the short-run adjustment process for both the firm and the industry.
3) Show and explain the long-run adjustment process for both the form and the industry. What will happen to the number of firms in the new long-run equilibrium?