Suppose an increase in product demand occurs in a decreasing-cost industry. As a result,
A) the new long-run equilibrium price will be lower than the original long-run equilibrium price.
B) equilibrium quantity will decline.
C) firms will eventually leave the industry.
D) the new long-run equilibrium price will be higher than the original price.

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, as demand increases, firms experience lower costs due to economies of scale or other factors. This leads to a lower long-run equilibrium price as the industry expands.

Suppose an Increase in Product Demand Occurs in a Decreasing-Cost