An Industry Is in ________ If Firms Have an Incentive

question 227

Multiple Choice

An industry is in ________ if firms have an incentive to enter or exit in the ________ run.

• A) disequilibrium; short
• B) disequilibrium; long
• C) equilibrium; short
• D) equilibrium; long

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Definitions:

Scale of Operation

The size at which a company or factory operates, often impacting its production efficiency and costs.

Long Run

pertains to a time period in economics during which all factors of production and costs are variable, allowing for full adjustment to any change.

Diminishing Returns

A principle stating that as one input variable is increased, there will be a point at which the additions of output will begin to decrease, holding all other inputs constant.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm operates at higher levels of output.