If the Demand for a Product Increases in an Increasing-Cost

question 57

Multiple Choice

If the demand for a product increases in an increasing-cost industry, as the market adjusts in the long run, production costs for all firms will

• A) rise as new firms enter the industry.
• B) fall as new firms enter the industry.
• C) remain unchanged.
• D) fall as firms exit the industry.

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Definitions:

Annuity

An investment plan that entails fixed payments to beneficiaries, mainly to serve as an income source for those who have retired.

Payment Interval

The periodicity of payments being made or received, for example, on a monthly, quarterly, or yearly basis.

Compounded Yearly

An interest calculation where the interest is added to the principal balance once a year, allowing the total amount to earn interest annually.

Economic Advantage

A benefit or gain in a financial context that gives an individual, company, or country a better position compared to others.