Good W is produced in a competitive industry with increasing…
Good W is produced in a competitive industry with increasing costs of production. The figure below shows how a typical firm’s long-run average cost curve shifts upward as industry output of good W expands. With 50 firms in the industry, each firm faces an identical long-run average cost curve given by LAC. With 80 firms in the industry, each firm faces an identical long-run average cost curve given by LAC’. And with 120 firms in the industry, each firm faces an identical long-run average cost curve given by LAC”. When there are 80 firms in the industry in long-run competitive equilibrium, the long-run average cost (LAC) of producing good W is $_________, and each firm earns $_________ of economic profit.