5. Draw graphs showing a perfectly competitive firm and industry in long-run equilibrium.
a. How do you know that the industry is in longrun
b. 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
c. Show and explain the long-run adjustment process
for both the firm and the industry. What
will happen to the number of firms in the new
3. Suppose the demand curve for a monopolist is
QD = 500 − P, and the marginal revenue function
is MR = 500 − 2Q. The monopolist has a constant
marginal and average total cost of $50 per unit.
a. Find the monopolist’s profit-maximizing output
b. Calculate the monopolist’s profit.
c. What is the Lerner Index for this industry?