Assume that a perfectly competitive market is in long-run equilibrium. Suppose as a result of a health hazard associated with the industry's product, demand decreases drastically. What is the immediate result of this event?
A) The typical firm's average total cost curve shifts downward.
B) The typical firm's marginal cost curve shifts to the left.
C) The market price falls and the typical firm suffers an economic loss.
D) The market supply increases to offset the fall in demand.
Question 2
If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?
A) Inventories will decline, and GDP and employment will decline.
B) Inventories will rise, and GDP and employment will rise.
C) Inventories will decline, and GDP and employment will rise.
D) Inventories will rise, and GDP and employment will decline.
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