If Firms in a Competitive Industry Are Facing a Continual

question 91

Multiple Choice

If firms in a competitive industry are facing a continual decrease in demand for their product, in the long run

• A) existing firms will modernize plant and equipment in order to increase efficiency.
• B) capacity in the industry will gradually shrink as plant and equipment is not replaced.
• C) newer, more efficient firms will enter the industry and earn normal profits.
• D) existing firms will expand output as a means of recovering losses.
• E) firms will begin advertising in order to increase demand for their product.