Industry Y is a perfectly competitive industry.Assume that as a result of changes in other markets there is a twenty percent increase in the price of variable inputs used by firms in industry Y.After all adjustments have taken place,we would expect the equilibrium price in industry Y to:

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Quizplus · Accepted Answer

In a perfectly competitive industry, an increase in the price of variable inputs would raise the costs of production for all firms. This would lead to a decrease in supply as firms reduce output or exit the market, causing the equilibrium price to increase. With higher costs and prices, less efficient firms may not be able to cover their costs, leading to a decrease in the number of firms in the industry.

Industry Y Is a Perfectly Competitive Industry