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Last Updated on 03/18/2023 by Sophia

A normal good is being produced in a constant-cost, perfectly competitive industry. Initially, each firm is in long-run equilibrium.

a. Graphically illustrate and explain the short-run adjustments for the market and the firm to a decrease in consumer incomes. Be sure to discuss any changes in output levels, prices, profits, and the number of firms.

b. Next, show on your graph and explain the long-run adjustment to that income change. Be sure to discuss any changes in output levels, prices, profits, and the number of firms.