Assume That a Perfectly Competitive Market Is in Long-Run Equilibrium

question 24

Multiple Choice

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product, demand decreases drastically.The immediate result of this event is

• A)The market price falls and the typical firm suffers an economic loss.
• B)The market supply increases to offset the fall in demand.
• C)The typical firm's average total cost curve shifts downward.
• D)The typical firm's marginal cost curve shifts to the left.

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Definitions:

Split-Off Point

The point in processing at which all joint costs have been incurred.

Relative Net Realizable Values

A method used to allocate joint costs based on the estimated final sales value of products minus any additional processing costs.

Charge

A fee or price asked for goods and services, or an accounting entry reflecting a debt or liability.