Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a higher long-run price, we know that
A) this is a decreasing-cost industry.
B) this is an increasing-cost industry.
C) some firms will be losing money in the long run.
D) after further adjustments, price will fall to its original level.
A
You might also like to view...
To fully understand how taxes affect economic well-being, we must compare the
a. benefit to buyers with the loss to sellers. b. price paid by buyers to the price received by sellers. c. profits earned by firms to the losses incurred by consumers. d. decrease in total surplus to the increase in revenue raised by the government.
Figure 14-5
In , AD1 and SRAS1 indicate an economy initially operating at full-employment output level, Y1. The long-run impact of the Fed unexpectedly shifting to a more restrictive monetary policy will be
a.
a decrease in aggregate demand to AD2 and a decrease in real output to Y2.
b.
a decrease in the full-employment level of output to Y2.
c.
a decrease in aggregate demand to AD2 and an increase in short-run aggregate supply to SRAS2, causing the price level to fall to P3 and real output to remain unchanged at Y1.
d.
no change; AD and SRAS will stay at AD1 and SRAS1.