Assume That Goods X and Y Are Substitutes and Are

question 15

Multiple Choice

Assume that goods X and Y are substitutes and are produced in perfectly competitive markets.If there is a decrease in the supply of good X,which of the following will happen in the market for good Y in the long run?

• A)Firms will exit, causing market price to rise.
• B)Firms will enter, causing market price to fall.
• C)Price will be higher at the new long-run equilibrium as a result of entry into the market.
• D)The firms that were already in the industry will continue to earn positive economic profit.

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Definitions:

Normative Statements

Statements that express opinions on how the world ought to be, involving value judgments rather than factual claims.

Expressions Of Facts

Statements that aim to convey information about reality or actual events without alteration.

Economic Model

A simplified representation or framework that economists use to describe and analyze economic processes, relationships, or phenomena.

Capital Goods

Long-lasting goods purchased and used by businesses to produce goods and services and contribute to their output.