In the perfectly competitive market for mobile phone production all firms have access to the same technology. Suppose that the mobile phone industry starts from a long run equilibrium and has decreasing marginal costs. Assume that a demand is affected by a negative shock. O In the short run, the number of firms doesn't change, prices drop and profits decline (become negative) O In the long run, the number of firms decreases (firms exit), prices increase and profits go to zero O In the short run, the number of firms, prices and profits remain same but in the long run all of these decline O Both a) and b)

In the perfectly competitive market for mobile phone production all firms have access to the same technology. Suppose that the mobile phone industry starts from a long run equilibrium and has decreasing marginal costs. Assume that a demand is affected by a negative shock. O In the short run, the number of firms doesn't change, prices drop and profits decline (become negative) O In the long run, the number of firms decreases (firms exit), prices increase and profits go to zero O In the short run, the number of firms, prices and profits remain same but in the long run all of these decline O Both a) and b)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.6P

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