2. (Points: 2) Assume that a competitive constant-cost industry is in long-runeq
ID: 1243652 • Letter: 2
Question
2.
(Points: 2) Assume that a competitive constant-cost industry is in long-runequilibrium when market demand suddenly decreases. Which of thefollowing statements is incorrect?a. Existing firms will start sufferinglosses in the short run
b. Existing firms will stop producing in the shortrun if AVC exceeds AR at the profit maximizing outputlevel
c. Some firms will exitthe industry in the long run
d. Market supply will shift to theright in the long run
2.
(Points: 2) Assume that a competitive constant-cost industry is in long-runequilibrium when market demand suddenly decreases. Which of thefollowing statements is incorrect?a. Existing firms will start sufferinglosses in the short run
b. Existing firms will stop producing in the shortrun if AVC exceeds AR at the profit maximizing outputlevel
c. Some firms will exitthe industry in the long run
d. Market supply will shift to theright in the long run
Explanation / Answer
B. Existing firms will stop producing in short run if AVC exceedsAR in the profit maximizing zone.
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