In a Constant Cost Industry, P = AC = $20

question 1

Multiple Choice

In a constant cost industry, P = AC = $20. Which sequence of events follows an increase in demand?

• A) P > AC, firms make an economic profit, existing firms expand output, new firms enter the industry, the short-run supply curve shifts right, price falls until profits return to $0
• B) P > AC, firms make an economic profit, existing firms expand output, new firms enter the industry, the short-run supply curve shifts left, price falls until profits return to $0
• C) P < AC, firms suffer an economic loss, existing firms reduce output, new firms enter the industry, the short-run supply curve shifts right, price falls until profits exceed $0
• D) P = AC, firms make no economic profit, existing firms leave output unchanged, new firms enter the industry, profits remain normal, P = AC = $20

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Definitions:

Rounded Pebbles

Small, smooth rocks that have been eroded and smoothed over time by water or other natural forces.

Shells

Shells are hard, protective outer layers created by animals, particularly mollusks such as snails, oysters, and clams, as a form of protection or body support.

Well Sorted

A condition of sedimentary particles that display a narrow range of sizes due to the action of transport and deposition processes.

Cross-bedding

A geological feature that forms as inclined layers of sediment are deposited across a horizontal surface, indicating ancient water or wind flows.