A decrease in the number of firms in a market will cause supply ...

[urbanoutfitters]

A decrease in the number of firms in a market will cause supply to increase.
 
  Indicate whether the statement is true or false

Question 2

Thinking of a Gap store as a production plant, explain why Gap is making a decision to reduce the size of its stores. Is Gap's decision a long-run decision or a short-run decision?
 
  What will be an ideal response?

[helenmarkerine]

Answer to Question 1

FALSE

Answer to Question 2

Gap believes that its stores are too large and that it is operating where it has diseconomies of scale. By reducing the size of its plant (its stores) Gap can slide down its LRAC curve and decrease its average cost. Gap's decision is a long-run decision because it involves the size of the firm's plant.