In a Decreasing-Cost Industry

question 42

Multiple Choice

In a decreasing-cost industry,

• A) there will be no firm entry because the increased supply will reduce the long-run equilibrium price.
• B) the law of demand does not apply.
• C) greater demand leads to higher long-run equilibrium prices.
• D) lower demand leads to higher long-run equilibrium prices.

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Definitions:

Producer Surplus

The gap between the price sellers are ready to accept for a good and the actual price obtained.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved, leading to an underproduction or overproduction of that good or service.

Deadweight Loss

A loss of economic efficiency that occurs when the equilibrium outcome is not achieved or when the market does not allocate resources at the optimal point.

Tax Revenue

The profit derived by governments from tax collection.