Refer to the Following Figure

question 68

Multiple Choice

Refer to the following figure:

The graph on the left shows long-run average and marginal cost for a typical firm in a perfectly competitive industry. The graph on the right shows demand and long-run supply for an increasing-cost industry.
-If this were an increasing cost industry, what would be the price when the industry gets to long-run competitive equilibrium?

• A) between $35 and $15
• B) $35
• C) $15
• D) below $15
• E) above $35

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Definitions:

Relatively Elastic

Refers to a situation where the quantity demanded or supplied of a good changes significantly in response to changes in price.

Percentage Increase

calculates the rate at which a quantity grows over a period, expressed as a fraction of its original value.

Elastic

Describes a scenario where a small change in price leads to a large change in quantity demanded or supplied.

Inelastic

describes a situation where the demand or supply for a good is not significantly affected by changes in price.