Suppose an increase in product demand occurs in a decreasing-cost industry. As a result,
A)the new long-run equilibrium price will be lower than the original long-run equilibrium price.
B)equilibrium quantity will decline.
C)firms will eventually leave the industry.
D)the new long-run equilibrium price will be higher than the original price.

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, an increase in demand leads to economies of scale that lower production costs, resulting in a lower long-run equilibrium price.

Suppose an Increase in Product Demand Occurs in a Decreasing-Cost