Suppose a Competitive Market Has a Horizontal Long-Run Supply Curve

question 287

Multiple Choice

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

• A)at least some firms will shut down.
• B)price will fall below marginal cost for some firms.
• C)price will fall below average total cost for some firms.
• D)at least some firms will enter the industry.

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Definitions:

Perfect Information

A situation where all participants have full and equal knowledge about the game structure, strategies, and outcomes in decision-making scenarios.

Candy Store

A candy store is a retail establishment specializing in the sale of confections, chocolates, and various types of sweets.

Posterior Probabilities

These are the probabilities that are computed after taking into account the relevant evidence or data, particularly in the context of Bayesian inference.

Expected Monetary Value

A calculation used in decision-making that multiplies the potential outcomes by their respective probabilities to get an average outcome value.