If an industry has constant marginal and average costs, any shift in demand will eventually

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Quizplus · Accepted Answer

If marginal and average costs are constant, any shift in demand will result in an equal change in quantity supplied to meet the new demand level while keeping the equilibrium price constant. This is because constant costs mean that the unit cost of production remains the same, regardless of the level of output. Thus, firms will continue to supply the same quantity at the same price, irrespective of demand fluctuations, leading to a constant equilibrium price. There will be no need for firms to adjust their prices to maintain their profits as they are already earning normal profits under constant costs.

If an Industry Has Constant Marginal and Average Costs, Any