Suppose That Initially the Price Is $50 in a Perfectly

question 70

Multiple Choice

Suppose that initially the price is $50 in a perfectly competitive market.Firms are making zero economic profits.Then the market demand shrinks permanently and some firms leave the industry and the industry returns back to a long-run equilibrium.What will be the new equilibrium price, assuming cost conditions in the industry remain constant?

• A)$50.
• B)$45.
• C)Lower than $50 but exact value cannot be known without more information.
• D)Larger than $45 but exact value cannot be known without more information.

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Definitions:

Confidence Interval

A statistical range, based on sample data, within which a population parameter is estimated to lie with a certain level of confidence.

Number of Successes

In statistical experiments, the count of instances that meet a defined criterion for success.

Standard Error

A measure of the variability or dispersion of a sampling distribution, often used as an estimate of the accuracy of a sample mean.

Plus Four Method

A statistical method that adds four to the sample size and regards two successes and two failures in a binomial proportion confidence interval.