Figure 10-6 -Given That the Short-Run Cost and Demand Conditions Shown in Conditions

question 192

Multiple Choice

Figure 10-6
-Given that the short-run cost and demand conditions shown in Figure 10-6 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run?

• A) The firm will make long-run economic profits.
• B) The firm will face competition from new entrants into the industry, causing this firm's demand to decline until zero economic profits are restored.
• C) The firm will see some of its competitors exit from the industry, causing this firm's demand to increase until zero economic profits are restored.
• D) This industry is in long-run equilibrium and will not experience any new entry or exit of firms.

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Definitions:

Pyroclastic Column

A dense, vertical cloud of hot volcanic ash, gas, and debris that rises from a volcanic eruption, capable of causing widespread destruction.

Volcanic Ash

Fine particles of rock and glass created by volcanic eruptions.

Laki Eruption

A major volcanic event in 1783-1784 from the Laki fissure and the Grímsvötn volcano in Iceland, which released large amounts of sulfur dioxide, causing significant environmental and health impacts in Europe.

Aerosols

Very small solid particles or drops of liquid dispersed in the atmosphere.