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

question 71

Multiple Choice

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price

• A)and industry output will be less than the initial price and output.
• B)will be greater than the initial price, but the new industry output will be less than the original output.
• C)will be less than the initial price, but the new industry output will be greater than the original output.
• D)and industry output will be greater than the initial price and output.

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Definitions:

Setup Time

The amount of time required to prepare equipment, machinery, or systems for operation or production.

Manufacturing Cycle Efficiency

A measure of the efficiency of the production process, typically calculated as the value-added time as a proportion of the total throughput time.

Value-Added Time

The duration during which a product or service is being modified or enhanced to increase its value to the customer.

Throughput Time

The elapsed time from when production is started until finished goods are shipped.