Under What Conditions Would an Increase in Demand Lead to a Lower

question 68

Multiple Choice

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

• A)The firms in the market are part of a decreasing-cost industry.
• B)The firms in the market produce an inferior good.
• C)Potential new firms in the market are not attracted by economic profits.
• D)Increases in demand cannot lead to lower long-run equilibrium prices.

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Definitions:

Useful Life

The estimated period over which an asset is expected to be usable by the owner, affecting its depreciation calculation.

Book Value

The value of an asset according to its balance sheet account balance, taking into account the cost of the asset minus any depreciation, amortization, or impairment costs.

Fixed Factory Overhead

Indirect manufacturing costs that remain relatively constant regardless of the level of production, such as rent, utilities, and salaries of managers.

Incremental Analysis

A decision-making process used to determine the financial impact of different choices by comparing their costs and benefits.