FIGURE 4-3 -Refer to Figure 4-3,which shows a demand shift and the short-run and long-run supply curves for some product.In the new long-run equilibrium at E_L,producers' revenue A)is unambiguously lower than at E_S. B)could be higher or lower than at E_S,depending on the price elasticity of demand. C)is unambiguously lower than at E₀. D)could be higher or lower than at E₀,depending on the price elasticity of demand. E)is unambiguously higher than at E_S.

Question

Quizplus · Accepted Answer

In the new long-run equilibrium, producers' revenue could be higher or lower than at E_S, depending on the price elasticity of demand. If the demand is relatively inelastic, the decrease in quantity demanded from Q1 to Q2 will be small, resulting in a higher price and higher revenue for producers. However, if the demand is relatively elastic, the decrease in quantity demanded will be large, resulting in a lower price and lower revenue for producers. Therefore, the correct answer is B.

FIGURE 4-3 -Refer to Figure 4-3,which Shows a Demand Shift and the and the Short-Run