Assume a perfectly competitive industry is in long-run equilibrium at a price of $30. If this industry is an increasing-cost industry and the demand for the product increases, long-run equilibrium will be reestablished at a price
A) greater than $30.
B) of $30.
C) less than $30.
D) either greater than or less than $30 depending on the magnitude of the decrease in demand.

Question

Quizplus · Accepted Answer

In an increasing-cost industry, when demand increases, firms enter the market, causing input prices to rise due to increased demand for inputs. This results in a higher long-run equilibrium price.

Assume a Perfectly Competitive Industry Is in Long-Run Equilibrium at a Price