A decrease in the rental rate of capital can lead to a long run increase or decrease in the number of firms in the industry.
Answer the following statement true (T) or false (F)
True
Rationale: We know this will lead to a drop in output price -- which will cause the quantity demanded in the industry to increase. If all firms continue to produce the same quantity (or less), new firms must therefore have entered. But the lowest point of the AC curve could shift either to the left or the right -- and if it shifts to the right, firms end up producing more at the lower price. If they produce sufficiently more, then it could be the case that fewer firms provide more output in the long run equilibrium.
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a. True b. False
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a. peaks; troughs b. booms; recessions c. expansions; contractions d. contractions; expansions
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Answer the following statement true (T) or false (F)