Suppose that Keystone is a firm in perfectly competition ski resort business. If all Keystone’s input price unexpectedly double, and at the same time the product price doubles, what will happen to Keystone profit-maximizing level of output and its profit in the short run? In the long run? (Assume Keystone begin from a position of long run equilibrium.)

2 answers

Do a little research, and then take a shot. What do you think?
Hint, how would the average cost curve change if all input prices changed by the same factor (e.g., doubled)?
What does the demand curve for a single firm in a perfectly competitive industry look like; and how would it look if the output price changed (e.g., doubled)
average cost will curve up
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