Under what conditions would an increase in demand lead to a lower long-run equilibrium price?
A) The firms in the market are part of a decreasing-cost industry.
B) The firms in the market produce an inferior good.
C) Potential new firms in the market are not attracted by economic profits.
D) Increases in demand cannot lead to lower long-run equilibrium prices.

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, as demand for the product increases, the cost of production decreases due to economies of scale. This leads to lower long-run equilibrium price even with an increase in demand.

Under What Conditions Would an Increase in Demand Lead to a Lower