Constant Cost

Industry Coffee plantations

Market D & S Firm’s Long-run cost

LMC
₹
S1
D2
LAC

D1
S2
P1

Pe
Pe

QMES o qMES q
Q’MES

© IIMA (Prof. Satish Deodhar) Page 1

 Increasing Cost Industry Oil and natural gas
industry

Market D & S Firm’s Long-run cost

LMC
₹
S1
D2
LAC

D1
P1
S2

Pe
Pe

QMES o qMES q
Q’MES

© IIMA (Prof. Satish Deodhar) Page 2

 Applications of Competitive Market Framework
₹
a S

Free Trade is Welfare Improving

Pd b

x
y
Pw c
d

D
O QS QD Quantity
 … Free Trade is Welfare
Improving
₹
a S

PW d
c
y
x
Pd b

D
O
Quantity
 Impact of Quota Restrictions and
Tariff

S
₹

Pt
A B D
C
Pw

QS Q’S Q’D QD
Quantity