Question 1
Assume the tennis ball industry, a perfectly competitive, decreasing‐cost industry, is in long-run equilibrium with a market price of $5. If the demand for tennis balls decreases, long-run equilibrium will be reestablished at a price
◦ greater than $5.
◦ less than $5.
◦ equal to $5.
◦ either greater than or less than $5, depending on the number of firms that enter the industry.
Question 2
Assume the tennis ball industry, a perfectly competitive, increasing‐cost industry, is in long-run equilibrium with a market price of $5. If the demand for tennis balls decreases, long-run equilibrium will be reestablished at a price
◦ greater than $5.
◦ less than $5.
◦ equal to $5.
◦ either greater than or less than $5, depending on the number of firms that enter the industry.
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