Super Snackin Services is in long-run equilibrium, and then there is a decrease in the market demand for snacks. One expects that:
A)prices will fall in the short run, and new firms will enter the market in the long run.
B)prices will rise in the short run, and new firms will enter the market in the long run.
C)prices will fall in the short run, and firms will leave the market in the long run.
D)prices will rise in the short run, and firms will leave the market in the long run.

Question

Quizplus · Accepted Answer

Since there is a decrease in market demand, there will be excess supply in the short run, leading to a decrease in price. However, since the market is in long-run equilibrium, the decrease in demand will lead to some firms exiting the market, which will eventually restore the equilibrium price. This means that while prices fall in the short run, they will remain low in the long run due to fewer firms in the market. Therefore, option C is the best choice.

Super Snackin Services Is in Long-Run Equilibrium, and Then There