Asked by Nancy Lainez on May 11, 2024
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Suppose an increase in product demand occurs in a decreasing-cost industry.As a result:
A) the new long-run equilibrium price will be lower than the original long-run equilibrium price.
B) equilibrium quantity will decline.
C) firms will eventually leave the industry.
D) the new long-run equilibrium price will be higher than the original price.
Decreasing-Cost Industry
An industry where the average cost of production decreases as the industry grows and output increases, often due to economies of scale.
Demand Occurs
The moment at which consumers are willing and able to purchase a good or service at a given price.
Long-Run Equilibrium
A state in which all factors of production and costs are variable, and firms in the industry are earning only normal profits, with no incentive for entry or exit.
- Investigate the repercussions of consumer demand fluctuations on market stability in different industrial contexts.
- Gain insight into the idea of allocative efficiency and its applicability within wholly competitive market environments.
- Acknowledge the impact of technological advancements and resource costs in forming the cost configurations of sectors and the dynamics within markets.
Verified Answer
Learning Objectives
- Investigate the repercussions of consumer demand fluctuations on market stability in different industrial contexts.
- Gain insight into the idea of allocative efficiency and its applicability within wholly competitive market environments.
- Acknowledge the impact of technological advancements and resource costs in forming the cost configurations of sectors and the dynamics within markets.
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