A constant cost perfectly competitive market is in long run equilibrium At

A constant cost perfectly competitive market is in

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  • MICRO 13
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112) A constant cost, perfectly competitive market is in long-run equilibrium. At present, there are1,000 firms each producing 400 units of output. The price of the good is $60. Now suppose there isa sudden increase in demand for the industryʹs product which causes the price of the good to riseto $64. In the new long-run equilibrium, how will the average total cost of producing the goodcompare to what it was before the price of the good rose?A) The average total cost will be higher than it was before the price increase because ofdiseconomies of scale arising from the increased demand.B) The average total cost will be lower than it was before the price increase because ofeconomies of scale.C) The average total cost will be the same as it was before the price increase.D) The average total cost will be higher than it was before the price increase since the increase indemand will drive up input prices.Answer: C112)Diff: 3Page Ref: 415-416/415-416Topic: Constant-Cost IndustryLearning Outcome: Micro 13: Explain the relationship between production and profits under perfectcompetitionAACSB: Analytic Skills113) A constant-cost industry is an industry in which113)Diff: 2Page Ref: 415-416/415-416Topic: Constant-Cost IndustryLearning Outcome: Micro 13: Explain the relationship between production and profits under perfectcompetitionAACSB: Reflective Thinking114) The long-run supply curve for a perfectly competitive, constant-cost industry114)Diff: 1Page Ref: 415-416/415-416Topic: Constant-Cost IndustryLearning Outcome: Micro 13: Explain the relationship between production and profits under perfectcompetitionAACSB: Reflective Thinking37

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