Suppose the Long-Run Supply Curve for a Perfectly Competitive Industry

question 116

Multiple Choice

Suppose the long-run supply curve for a perfectly competitive industry is horizontal at a price of $12,and the minimum short-run average variable cost for each of the identical N firms in the industry is $8.If the demand curve for the industry decreases so that it intersects the short-run supply curve of the industry at $10,

• A) in the short run the price will decrease to $10, and the number of firms will still be N. In the long run the price will return to $12, and the number of firms will be less than N.
• B) in the short run the price will decrease to $10, and the number of firms will be less than N. In the long run the price will return to $12, and the number of firms will return to N.
• C) in the short run the price will remain at $12, and the number of firms will still be N. In the long run the price will fall to $8, and the number of firms will be less than N.
• D) In the short run the price will decrease to $10, and the number of firms will be less than N. In the long run the price will return to $12, and the number of firms will return to N.

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