Suppose a Perfectly Competitive Firm Is in Long-Run Equilibrium and There

question 55

Multiple Choice

Suppose a perfectly competitive firm is in long-run equilibrium and there is a decrease in demand.Suppose also that the firm operates in an industry in which the prices of productive inputs vary with the level of output,increasing when output increases and decreasing when output decreases.Which of the following will occur at the new long-run equilibrium?

• A)Price will be lower than it was at the initial long-run equilibrium.
• B)Price will be the same as it was at the initial long-run equilibrium.
• C)Price will be higher than it was at the initial long-run equilibrium.
• D)The industry supply function will shift to the right.

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Definitions:

Individuals

Distinct entities or beings with unique characteristics, often referring to single human beings or organisms.

Interference Competition

A direct form of competition where organisms physically prevent their rivals from accessing resources.

Exploitative Competition

A form of competition where organisms indirectly interact with each other by consuming scarce resources.

Scavenging

The act of consuming dead or decaying organic matter, a process carried out by certain animals, fungi, and microorganisms, which helps recycle nutrients in ecosystems.