Suppose a Perfectly Competitive Constant-Cost Industry Is in Long-Run Equilibrium

question 223

Multiple Choice

Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when market demand suddenly increases.What would probably happen to a firm in this industry in the long run?

• A)It would experience no change for the original equilibrium
• B)It would experience a higher equilibrium price
• C)It would experience a lower equilibrium price
• D)It would experience the same equilibrium price but would reduce its output
• E)It would experience higher average total costs and would reduce its output

---

Definitions:

Liquidity Ratios

Measures that indicate a company's ability to meet its short-term debt obligations.

Long Period Of Time

A duration that extends over a considerable number of years, often used to refer to investments, strategic planning, or long-term goals.

Statement Of Income

Also known as the income statement, it's a financial report that shows a company's revenues, expenses, and profits over a specific period.

Vertical Analysis

A financial analysis method that expresses each item in a financial statement as a percentage of a base figure for the same period.