Suppose a perfectly competitive firm is in long-run equilibrium and there is a decrease in demand.Suppose also that the firm operates in an industry in which the prices of productive inputs vary with the level of output,increasing when output increases and decreasing when output decreases.Which of the following will occur at the new long-run equilibrium?

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, a decrease in demand leads to a lower price in the new long-run equilibrium because input prices decrease as output decreases, reducing costs and allowing firms to supply at a lower price.

Suppose a Perfectly Competitive Firm Is in Long-Run Equilibrium and There