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notka56 [123]
2 years ago
10

Assume the lunch plate industry in Oahu, a perfectly competitive industry, is in long-run equilibrium with a market price of $5.

If demand for lunch plate increases and this industry is a decreasing-cost industry, long-run equilibrium will be reestablished at _______ price.
Business
1 answer:
Wewaii [24]2 years ago
7 0

Answer:

Explanation:

The lunch plate industry in Oahu is a perfectly competitive industry.  

This industry is also a decreasing cost industry. A decreasing cost industry can be defined as the type of industry where an increase in the number of firms in the industry causes the average production cost to decline.  

The industry is currently in long-run equilibrium and has the price level at $5.

As the demand increases, the price level will initially increase. But this increase in the price will cause the profits to increase and thus attract potential firms to join the market.  

As the number of firms increases the average cost of production will decrease. As a result, the supply in the market will increase more than the demand.  

So the long-run equilibrium will be reestablished at a lower price than earlier.

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$8750.87

Explanation:

This is compound interest problem. The formula used to solve this would be:

F=P(1+r)^t

Where

F is the future value (what we want, after 3 years)

P is the initial value (given 6900)

r is the rate of interest per period

here, 8% per year, so 8/4 = 2% per period (since compounded per quarter)

t is the time (3 years and compounding per year so times of compounding is 3*4 = 12), so t = 12

Substituting, we get our answer:

F=P(1+r)^t\\F=6900(1+0.02)^{12}\\F=6900(1.02)^{12}\\F=8750.87

<u>There will be about $8750.87 at the account at the end of 3 years!</u>

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B) the less an additional unit of capital adds to production

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