Suppose That the Market for Candy Canes Operates Under Conditions

question 74

Multiple Choice

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total costs of producing candy canes by $0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long we will observe:

• A) firms leaving the industry.
• B) firms entering the industry.
• C) some firms entering and some firms leaving.
• D) neither entry nor exit from the industry.

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