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A Perfectly Competitive Industry in Long-Run Equilibrium Comprises 200 Identical

question 11

Essay

A perfectly competitive industry in long-run equilibrium comprises 200 identical firms. In one of the firms, the workers unionize and receive a 20% wage increase. What happens to the unionized firm in the short run and the long run? Supplement your answer with a graph.


Definitions:

Average Variable Cost (AVC)

The total variable cost divided by the quantity of output produced, measuring the variable cost per unit.

Average Total Costs (ATC)

The per-unit total cost (including both fixed and variable costs) of producing a good or offering a service.

Manufacturing Firm

A company involved in the conversion of raw materials into finished goods through the use of equipment and processes.

Marginal Returns

The additional output that is produced by utilizing one more unit of a particular input, while holding all other inputs constant.

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