Suppose the long-run equilibrium price in a perfectly competitive market is $100. When demand increases, if it is a(n) _____ industry, the long-run equilibrium price will _____ to reflect a _____ long-run average total cost.

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, when demand increases, firms enter the market, leading to economies of scale and lower costs. Thus, the long-run equilibrium price falls to reflect a lower long-run average total cost.

Suppose the Long-Run Equilibrium Price in a Perfectly Competitive Market