Assume a Purely Competitive Decreasing-Cost Industry Is Initially in Long-Run

question 18

Multiple Choice

Assume a purely competitive decreasing-cost industry is initially in long-run equilibrium but then there is a decrease in market demand for the product.After all economic adjustments to this new situation have taken place, product price will be

• A)higher, but total output will be lower.
• B)lower, and total output will be lower.
• C)higher, and total output will be higher.
• D)lower, but total output will be higher.

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Definitions:

Productivity

A measure of efficiency that calculates the amount of output produced per unit of input.

Service Sector

Refers to the segment of the economy that provides services rather than producing goods, including industries like retail, healthcare, and finance.

Labour-intensive

Describing industries or processes that require a large amount of manual labor compared to the amount of capital.

Automate

the process of using technology to perform tasks with minimal human intervention, improving efficiency and accuracy.