Beginning from a Long Run Equilibrium in an Increasing Cost

question 59

Multiple Choice

Beginning from a long run equilibrium in an increasing cost industry,if there is a substantial,permanent fall in demand for industry output:

• A) firms will leave the industry, the quantity produced will fall, and prices will end up lower than their initial long run equilibrium level.
• B) firms will leave the industry, the quantity produced will fall, and prices will end up higher than their initial long run equilibrium level.
• C) firms will leave the industry, the quantity produced will fall, and prices will end up at the same level as their initial long run equilibrium level.
• D) firms will enter the industry, the quantity produced will rise, and prices will end up lower than their initial long run equilibrium level.

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Definitions:

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