If Input Costs Remain the Same as Industry Output Expands

question 104

Multiple Choice

If input costs remain the same as industry output expands, what would you expect to be the long-run impact of an increase in demand on an industry currently in long-run equilibrium?

• A) There will be more firms, and the price will increase.
• B) There will be fewer firms, but the price will remain the same.
• C) There will be fewer firms, and the price will decrease.
• D) There will be more firms, but the price will remain the same.

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Definitions:

Profit Margin

A financial ratio calculated as net income divided by revenue, indicating the percentage of revenue that is retained as profit after accounting for costs and expenses.

Asset Turnover

A metric indicating how effectively a company utilizes its assets to produce sales income.

Financial Ratio

A numerical comparison derived from a company's financial statements, used to evaluate aspects of its operational efficiency, liquidity, profitability, and solvency.

Nonrecurring Items

Expenses or incomes that appear infrequently or irregularly on the financial statements, not expected to recur in the foreseeable future.