implying K The total cost is then c(y)=cIy)+C2(g2)=2vwr(y +92)=2yywr From the profit function T= py-c(y)=(p-2vwr)y, we immediately find the long-run supply function if p> U'=10,oo] if p=2Vu 0ifp<2√ That is, the long-run industry supply curve is horizontal (d) In a competitive market, with a horizontal industry supply curve, the long-run equi librium price must be p=2ywr, whatever the industry demand curve (e) The original long-run equilibrium price is p=2, and the new price is p=2v2.The total capital investment is With an increase in w and p, output y is reduced, implying K will be reducedimplying Li = uw r yi, Ki = u r w yi. The total cost is then c(y) = c1(y1) + c2(y2)=2√wr(y1 + y2)=2y √wr. From the profit function π = py − c(y)=(p − 2 √wr)y, we immediately find the long-run supply function: ys = ⎧ ⎪⎪⎪⎪⎪⎨ ⎪⎪⎪⎪⎪⎩ ∞ if p > 2 √wr [0, ∞] if p = 2√wr 0 if p < 2 √wr. That is, the long-run industry supply curve is horizontal. (d) In a competitive market, with a horizontal industry supply curve, the long-run equi￾librium price must be p = 2√wr, whatever the industry demand curve is. (e) The original long-run equilibrium price is p = 2, and the new price is p = 2√2. The total capital investment is K = K1 + K2 = u r w (y1 + y2) = u r w y. With an increase in w and p, output y is reduced, implying K will be reduced. p p y s y D . . 2—5