Show graphically and explain the adjustment process for perfect competition in the long run to an increase in demand a decrease in demand and a change in technology P2 P1 MC ATC AVC MR2 D2 MR D q1 q2 One producer of tofu Shaded area profit Profit bad In PC because new firms will join An increase in demand leads to an increase in supply which brings profit back down to zero D2 You would earn your opportunity cost different from breaking even You can t make over your opportunity cost in the long run because that would serve as a green light to other firms to join the market Microeconomics Increase in demand P S1 D2 Q D1 Q Tofu Industry P2 P1 P P1 P2 S1 MC S2 P1 P2 ATC AVC Q1 Q2 q2 q1 An increase in new technology causes everything to move to the right southeast MC ATC AVC Price goes down supply goes up quantity goes up Demand stays the same This is the magic point Where MR MC is the profit maximizing level of output q1 MC MR
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