Assume a perfectly competitive industry is in long-run equilibrium at a price of $150. If this industry is an increasing-cost industry and the demand for the product increases, long-run equilibrium will be reestablished at a price
A) greater than $150.
B) of $150.
C) less than $150.
D) either greater than or less than $150 depending on the magnitude of the decrease in demand.

Question

Quizplus · Accepted Answer

In an increasing-cost industry, when demand increases, firms enter the market, driving up the prices of inputs due to increased demand for these inputs. This leads to higher production costs, which means the new long-run equilibrium will be established at a price greater than the initial equilibrium price of $150.

Assume a Perfectly Competitive Industry Is in Long-Run Equilibrium at a Price