Assume the Tennis Ball Industry, a Perfectly Competitive Industry, Is

question 352

Multiple Choice

Assume the tennis ball industry, a perfectly competitive industry, is in long-run equilibrium with a market price of $5. If the demand for tennis balls increases and the industry experiences decreasing returns to scale, long-run equilibrium will be reestablished at a price

• A) greater than $5.
• B) less than $5.
• C) equal to $5.
• D) either greater than or less than $5, depending on the number of firms that enter the industry.

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Definitions:

External Costs

Costs that are not borne by the parties involved in an economic transaction but are imposed on others outside of the transaction.

Air Pollution Control System

Technologies and measures designed to reduce or eliminate the emission of pollutants into the atmosphere.

Operating a Car

The act of controlling and managing the functions and movement of a motor vehicle.

Gross Domestic Product

The total value of all goods and services produced within a country's borders in a specific time period, serving as a broad measure of economic activity.