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

question 63

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:

Credit Purchases

Transactions where goods, services, or assets are bought with the promise of future payment, often involving interest charges over time.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Inventories

The raw materials, work-in-process products, and finished goods considered part of a business's assets that are ready or will be ready for sale.

Taxes Payable

Liabilities owed to various governmental entities within the current fiscal period.