Question

suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. subsequently, a decrease in population decreases the demand for haircuts. in the short run, we expect that the market price will _____ and the output of a typical firm will _____. a) rise; rise b) rise; fall c) fall; rise d) fall; fall

Answer 1

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. subsequently, a decrease in population decreases the demand for haircuts. In the short run, we expect that the market price will fall and the output of a typical firm will fall.

What is Long Run?

A time frame known as the "long run" is one in which all cost and production components are erratic. Long Run cost adjustments are possible for businesses, although short Run pricing changes can only be influenced by changes in production levels. Even though a company can have a monopoly in the short term, they might anticipate competition in the long run. A long run is a period of time when a producer or manufacturer can be flexible with its production choices. On the basis of anticipated profits, businesses can either increase or decrease their production capacity, or enter or leave a certain industry. Long-term-focused businesses are aware that changing output levels won't bring supply and demand into equilibrium.

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