Asked by
Apolosi Matani
on Oct 25, 2024
Verified
Refer to Figure 8.8.1 above. After the increase in demand, from D1 to D2 in panel (b) , and being this a constant-cost industry, what is likely to happen in the market?
A) Supply will not shift, and the market will settle in equilibrium at point B.
B) Supply will shift to S2 and the market will settle in equilibrium at point C.
C) Supply will shift to S2 and the market will settle in equilibrium back at point A, after going through B and then C.
D) Supply will not shift and the market will settle in equilibrium back at point A after moving only temporarily to point B.
Constant-cost Industry
An industry in which the input costs do not change as the industry's output changes, leading to a flat supply curve.
Demand Increase
A situation where the desire for a good or service exceeds the previous level at the current price.
Market Equilibrium
The point at which the quantity demanded by consumers equals the quantity supplied by producers, resulting in no economic pressure to change the price.
- Acquire knowledge about the economic outcomes associated with participation in increasing-cost and constant-cost sectors.
- Discern the differences between short-run and long-run modifications in industry practices following variations in demand or cost.
Verified Answer
DG
Learning Objectives
- Acquire knowledge about the economic outcomes associated with participation in increasing-cost and constant-cost sectors.
- Discern the differences between short-run and long-run modifications in industry practices following variations in demand or cost.