In: Economics
University of Waterloo is predicting an at least a 15% reduction in its revenues in the Fall 2020 semester due to a reduced demand for university education caused by the current pandemic. Assume a decreasing returns to scale technology and a competitive market. Also, assume that the market was in the long run equilibrium prior to the outbreak of covid-19. Discuss the short run and long run implications of this reduction for:
1. the choice of output by the university
2. capital and labour choices by the university