Graph 14-9
-Refer to Graph 14-9.If the market starts in equilibrium at point C in panel (b), a decrease in demand will ultimately lead to:

Question

Graph 14-9 
-Refer to Graph 14-9.If the market starts in equilibrium at point C in panel (b), a decrease in demand will ultimately lead to:

Quizplus · Accepted Answer

A decrease in demand will lead to excess supply in the market, causing firms to lower their production levels to reach a new equilibrium. This decrease in production will make it unprofitable for some firms to remain in the market, ultimately leading to a reduction in the number of firms operating in the market. This will continue until a new equilibrium is reached where the remaining firms are producing at a level where they can earn profits, which will be at a lower quantity and price level than the original equilibrium at point C. Therefore, choice C is the correct answer as it explains the outcome of a decrease in demand in the long run.

Graph 14-9 -Refer to Graph 14-9.If the Market Starts in Equilibrium at in Equilibrium