Asked by Bulut Yasin on May 16, 2024
Verified
Assume a purely competitive increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will
A) leave the industry, price will fall, and quantity produced will rise.
B) enter the industry and price and quantity will both rise.
C) leave the industry and price and quantity will both rise.
D) leave the industry, price will fall, and quantity produced will fall.
Competitive Increasing-cost Industry
An industry in which the entry of new firms causes the prices of inputs to increase, affecting the cost of production for all firms.
Long-run Equilibrium
A state in which all factors of production and inputs can be varied, allowing for full adjustment by firms and the economy, and no excess demand or supply exists.
Decline in Demand
A decrease in the willingness and ability of consumers to buy goods and services at existing prices, which can lead to lower market prices.
- Learn about the factors influencing long-term market equilibrium through the lens of supply and demand in completely competitive markets.
- Identify the conditions under which purely competitive firms make economic profits or losses in the short run and long run.
Verified Answer
Learning Objectives
- Learn about the factors influencing long-term market equilibrium through the lens of supply and demand in completely competitive markets.
- Identify the conditions under which purely competitive firms make economic profits or losses in the short run and long run.
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