The Price of Natural Gas Fell and the Quantity Sold

question 16

Multiple Choice

The price of natural gas fell and the quantity sold also fell.Everything else being equal, it is consistent that

• A)the price of oil fell.
• B)natural gas workers received large wage increases.
• C)more efficient gas drilling equipment was installed.
• D)consumer incomes rose.
• E)the supply of natural gas fell.

Analyze the effects of demand changes on industry growth, prices, and firm entry or exit in the long run.

Understand how industry characteristics influence the shape of the long-run industry supply curve.

Recognize the process and outcomes of resource allocation in perfectly competitive markets.

Identify the factors leading to movements along or shifts of the long-run average cost curve in response to industry dynamics.

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Definitions:

Economies of Scale

The financial benefits gained by businesses as a result of their operation size, wherein the expense for each unit produced typically drops as the scale expands.

Average Total Costs

The total cost of production divided by the quantity of output produced; it includes both fixed and variable costs.

Economies of Scale

Refers to the cost advantage that arises with increased output of a product, where the average cost per unit decreases as production scales up.

Diseconomies of Scale

The phenomenon where a company's production costs increase as it produces more, resulting in a decrease in efficiency.