5. Draw graphs showing a perfectly competitive firm

and industry in long-run equilibrium.

a. How do you know that the industry is in long-

run equilibrium?

b. Suppose that there is an increase in demand for

this product. Show and explain the short-run

adjustment process for both the firm and the

industry.

c. Show and explain the long-run adjustment pro-

cess for both the firm and the industry. What

will happen to the number of firms in the new

long-run equilibrium?