A constant-cost, perfectly competitive market is in long-run equilibrium. At present, there are 1,000 firms each producing 400 units of output. The price of the good is $60
Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64. In the new long-run equilibrium, how will the average total cost of producing the good compare to what it was before the price of the good rose?
A) The average total cost will be the same as it was before the price increase.
B) The average total cost will be lower than it was before the price increase because of economies of scale.
C) The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand.
D) The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices.
A
You might also like to view...
According to economic theory, a rising money supply influences stock prices through a(n) __________ in the __________ stock
A) increase; demand for B) decrease; demand for C) increase; supply of D) decrease; supply of
A person is dynamically consistent if:
A. his preferences over the alternatives available at some future date change as the date approaches. B. his preferences over the alternatives available at some future date do not change as the date approaches. C. he does not always want to follow through on his plans and intentions. D. he has complete self-control with occasional lapses.
Sheila and Jim live in an island where they are the only two workers. Sheila can either catch 10 fish or gather 40 pounds of berries each day, and Jim can either catch 8 fish or gather 24 pounds of berries each day. Both of them work 200 days per year. At current world prices 1 fish trades for 3.5 pounds of berries. In a closed economy, if the citizens of this island consume 1,200 fish per year, how many pounds of berries can they consume?
A. 4,800 pounds B. 9,200 pounds C. 12,800 pounds D. 8,000 pounds
Which statement is true?
A. The national debt is larger than our GDP. B. The national debt has doubled over the last two years. C. The national debt is nearly $400 billion. D. The national debt has increased every year from 1969 to 1997.