A Competitive Market Is in Long-Run Equilibrium

question 3

Multiple Choice

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

• A)fall in the short run.All firms will shut down, and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
• B)fall in the short run.No firms will shut down, but some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
• C)fall in the short run.All, some, or no firms will shut down, and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
• D)not fall in the short run because firms will exit to maintain the price.

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