If an industry has a horizontal long-run industry supply curve, then which of the following must be true?
A)An increase in market demand results in firm entry, and so market price declines in the long run.
B)An increase in market demand results in industry expansion, and so market price increases in the long run.
C)A decrease in market demand results in firm exit, and so market price in the long run remains the same as before the market demand change.
D)A decrease in market demand results in firm exit, and so market price in the long run declines in the long run.
E)Any change in market demand has no effects on firms.

Question

Quizplus · Accepted Answer

In a perfectly competitive industry with a horizontal long-run supply curve, any change in demand leads to entry or exit of firms, but the market price remains constant in the long run.

If an Industry Has a Horizontal Long-Run Industry Supply Curve