Assume a Purely Competitive, Increasing-Cost Industry Is in Long-Run Equilibrium

question 32

Multiple Choice

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will

• A) leave the industry, price will decrease, and quantity produced will increase.
• B) enter the industry and price and quantity will both increase.
• C) leave the industry and price and output will both increase.
• D) leave the industry and price and output will both decline.

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Definitions:

Government Deregulation

The process of reducing or eliminating government rules controlling how businesses can operate, often to encourage more competition and innovation.

Economies of Scale

Enterprises gain cost benefits from their scale of operation, which typically results in the cost per unit of output decreasing as the scale increases.

Economic Profit

The total revenue of a business minus its explicit and implicit costs.

Government Regulation

Policies and rules established by government bodies to control and guide the activities of businesses and individuals within the society.