Question

18. A constant-cost, perfectly competitive widget industry is in long-run equilibrium. A decrease in the

price of gadgets, a substitute for widgets, will most likely result in


A. an increase in the demand for widgets, followed by a decrease in the supply of widgets


B. higher short-run and long-run prices for widgets


C. short-run losses for widget producers, followed by the exit of some firms


D. an upward shift in all short-run cost curves, followed by a higher long-run price for widgets


E. a higher short-run price for widgets, followed by an increase in the quantity produced

Answer 1

A. an increase in the demand for widgets, followed by a decrease in the supply of widgets

Step-by-step explanation:

This obeys the laws of demand and supply. As price reduces, demand increases and supply reduces.