A competitive market is in long-run equilibrium. If demand decreases, we can be
ID: 1156249 • Letter: A
Question
A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will
Fall in the short run. All firms will shut down and some of them will exit
the industry. Price will then rise to reach the new long-run equilibrium
Fall in the short run. No firms will shut down, but some of them will exit
the industry. Price will then rise to reach the new long-run equilibrium
Fall in the short run. All, some, or no firms will shut down, and some of
them will exit the industry. Price will then rise to reach the new long-run
equilibrium
Not fall in the short run because firms will exit to maintain the price
Explanation / Answer
Answer : A competitive firm is in long run equilibrium . If demand decreases, we can certian that price will fall in the short run.All, some or no firms will shut down and some of them will exist the industry. Price will them rise to reach the new long run equilibrium. It means that when demand decrease than the price has been reduced which shows that as some firms shut down and not survive in long run. After some time in long run price has been increased.
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