Figure 6.5 -Figure 6.5 Shows the Short-Run and Long-Run Effects of an of an Increase

question 165

Multiple Choice

Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, which of the following statements is TRUE in the long run?

• A) The market price drops below $12 as more firms enter the market and build more plants.
• B) Both existing firms and new firms earn a zero economic profit.
• C) All firms in the industry maximize their profits by producing the output where the marginal cost equals $10.
• D) all of the above

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Definitions:

Quantity Discounts

Price reductions applied to purchases made in large volumes, incentivizing bulk purchasing by decreasing the cost per unit with increased quantity.

Medical Society Facilitator

A professional responsible for coordinating activities and managing operations within a medical society or association.

Medical Support Group

A community or forum providing emotional encouragement, information, and resources for individuals facing similar health issues or diseases.

Gross Income

The total income earned by an individual or a business before any deductions or taxes are applied.