If the Demand Increases for the Product of a Constant-Cost

question 2

Multiple Choice

If the demand increases for the product of a constant-cost industry:

• A) long-run output goes up, but long-run price may go up or down.
• B) short-run output goes up, but long-run output may go up or down.
• C) short-run price goes up, but long-run price remains constant.
• D) long-run output goes up, but short-run price remains constant.
• E) long-run price goes up, but short-run price may go up or down.

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Definitions:

Debt-Equity Ratio

A financial ratio that represents the comparative deployment of shareholders' equity and debt in asset financing.

Total Asset Turnover

A financial metric indicating how efficiently a company uses its assets to generate sales revenue.

Profit Margin

A financial ratio that shows the percentage of revenue that surpasses the cost of goods sold, indicating the financial health and profitability of a business.

Net Working Capital

A measure of a company's short-term liquidity, calculated as current assets minus current liabilities.