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Shaiday Thomas
on Nov 04, 2024

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Assume the tennis ball industry, a perfectly competitive industry, is in long-run equilibrium with a market price of $5. If the demand for tennis balls increases and the industry experiences decreasing returns to scale, long-run equilibrium will be reestablished at a price

A) greater than $5.
B) less than $5.
C) equal to $5.
D) either greater than or less than $5, depending on the number of firms that enter the industry.

Decreasing Returns to Scale

A situation in which a proportional increase in all inputs leads to a less than proportional increase in output, indicating reduced efficiency as scale of production expands.

Long-Run Equilibrium

A state in which all factors of production and inputs can be adjusted by firms, leading to a situation where no firm has an incentive to change its output or production method.

  • Acknowledge the characteristics and significances of industries characterized by increasing, decreasing, or unchanging costs on the supply curve and market prices of these industries.
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Yeritza CarrascoNov 08, 2024
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