Assume hair cutting services are provided in a constant-cost perfectly competitive market and that the market is currently in long-run equilibrium. Suppose an increase in population increases the demand for haircuts. In the long run, we expect that the market price for haircuts will ______ and the quantity of haircuts provided by the typical firm will ______, and the number of firms in the market will ___________. ○ Increase; Increase; Increase ○ Return back to original price; Decrease; Decrease ○ Increase; Decrease; Decrease ○ Return back to original price; Decrease; Increase
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This is because the existing firms cannot immediately increase their output to meet the new demand. Show more…
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