Suppose a perfectly competitive industry with constant costs is initially in long-run equilibrium. Demand for the product produced in this industry increases due to a change in tastes and preferences. In the LONG run this will result in A. the product selling for a higher price, each firm producing more of the good, and positive economic profits for the firms in the industry. B. the product selling for a higher price; each firm in the industry producing the same level of the good as they did initially, since their capital is fixed; and each firm earning positive economic profit. C. the product selling for a higher price and firms making higher profits initially, but the industry will attract new firms, which will cause the price to fall back to its original level and economic profits to fall back to zero. D. the price staying constant, since the firms in this industry are price takers, and the output of each firm increasing; therefore each firm will earn positive economic profit.

Suppose a perfectly competitive industry with constant costs is initially in long-run equilibrium. Demand for the product produced in this industry increases due to a change in tastes and preferences. In the LONG run this will result in A. the product selling for a higher price, each firm producing more of the good, and positive economic profits for the firms in the industry. B. the product selling for a higher price; each firm in the industry producing the same level of the good as they did initially, since their capital is fixed; and each firm earning positive economic profit. C. the product selling for a higher price and firms making higher profits initially, but the industry will attract new firms, which will cause the price to fall back to its original level and economic profits to fall back to zero. D. the price staying constant, since the firms in this industry are price takers, and the output of each firm increasing; therefore each firm will earn positive economic profit.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 2.4P

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