On the industry graph, label the long run supply for the industry. Reconsider the constant cost perfectly competitive bicycle industry. The bicycle industry and typical firm are initially in long run equilibrium. Depict this situation on a firm and industry graph. Trace out the effects on long run industry price of a government program that increases the demand for steel, an input in the manufacturing of bicycles.
Steel is an increasing cost industry.
Explain your graph. Calculate Consumer Surplus and Producer Surplus at the equilibrium. B. Graph your results, using numbers and labeling your axes. You do not have to draw your graph to scale, but do label equilibrium price and quantity. D. Show the effect of the tax on the graph above.