Assume That a Decreasing-Cost Industry Experiences an Increase in Demand

question 86

Multiple Choice

Assume that a decreasing-cost industry experiences an increase in demand. In the long run, this will

• A)lead to a price increase.
• B)lead to a price decrease.
• C)have no influence on price.
• D)There is not enough information provided to answer this question.

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Definitions:

Depreciation Expense

An accounting method used to allocate the cost of a tangible asset over its useful life, representing how much of an asset's value has been used up over time.

Tax Credit

A reduction in the amount of taxes owed, dollar for dollar, for various types of investments or expenses.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis, reflecting the time value of money.

Initial Investment

The amount of money used to start a project, purchase an asset, or invest in a business venture.