Suppose Bicycles Are Produced by a Competitive Constant-Cost Industry,which Is

question 19

Essay

Suppose bicycles are produced by a competitive constant-cost industry,which is initially in a long-run equilibrium.For each of the following situations,design a supply-demand diagram that shows how market price and quantity will be affected in both the short run and the long run.In your diagrams,show the short-run supply,long-run supply,and demand curves,along with any shifts in these curves.Label the initial long-run equilibrium E₀,the new short-run equilibrium E₁,and the new long-run equilibrium E₂.

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Definitions:

Accounts Credited

Refers to the entries made on the credit side of a ledger, indicating a reduction in assets or an increase in liabilities or equity.

Supplies On Account

The purchase of supplies on credit, where payment is deferred to a later date.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance based on the account type.

Service Revenue

Income earned by a company through the provision of services to customers, as opposed to selling goods.