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

question 81

Multiple Choice

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed, product price will be

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

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Definitions:

Period Costs

Expenses that are not directly tied to the production of goods or services and are expensed in the period they are incurred, such as sales and administrative expenses.

Outdoor Furniture

Furniture designed for use outside the house, often made of materials resistant to weather, such as aluminum, plastic, or wood.

Casual Furniture Company

A business that specializes in creating and selling furniture designed for informal settings, typically emphasizing comfort and style.

Conversion Costs

The combined costs of direct labor and manufacturing overhead that are incurred to convert raw materials into finished goods.