Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 3

Figure 1 shows the short-run and long-run adjustment process for an increasing cost industry responding to an increase in demand. Draw a similar two-panel diagram,illustrating the response of an increasing cost industry to a decrease in demand. Draw in the long-run supply curve. In the long run,will the price be higher or lower,compared to the initial price?
Figure 1 An Increasing Cost Industry