Suppose That Initially the Price Is $50 in a Perfectly

question 123

Multiple Choice

Suppose that initially the price is $50 in a perfectly competitive market.Firms are making zero economic profits.Then the market demand shrinks permanently,some firms leave the industry,and the industry returns to a long-run equilibrium.What will be the new equilibrium price,assuming cost conditions in the industry remain constant?

• A) $50
• B) $45
• C) Lower than $50, but exact value cannot be known without more information.
• D) Larger than $45, but exact value cannot be known without more information.

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Definitions:

Federal Outlays

Government spending or expenditures, including on services, social security, defense, and interest on debt.

Stock Variable

A measurement at a specific point in time, such as the amount of money in a bank account or stock of goods.

Flow Variable

A variable that is measured over a specific period of time, representing dynamic elements of an economy like income or spending.

Federal Budget Deficit

The deficit occurring when government spending surpasses its income in a specific fiscal year.