What happens to a perfectly competitive market in long run equilibrium, if marginal costs are cut?
It is not possible to draw graphs in Yahho answers, nor is it necessary because you already have the graphs and what is required is to note down the nature of shifts thant the curve may undergo in the short and the longrun. Since the demand is assumed to remain the same, to start with in the extremely short run there would not be any change in the demand curve and the marginal revenue curve, both being the same and perfectly elastic (i.e. parallel to the horizontal (output quantity supplied/ demanded axis) because the market is assumed to remain perfectly competitive. But as the firms find their marginal costs to go down, the would to beat others in competition or protect their competitiveness will pass on the benefits of cost reduction to the customers. This would lead to a downward shift in the demand curve in the long run. Now, a new technology helps reduce marginal costs would mean that the marginal cost curve of each firm in the market should shift downwards (lower marginal cost a
