Question

When a firm is in a decreasing-cost industry, an increase in demand will result in economic  (Click to select)  losses  profits  . This will cause  (Click to select)  entry into  exit from  the industry, resulting in  (Click to select)  an increase  a decrease  in supply over time. This long-run adjustment will eventually cause the price level to  (Click to select)  increase  decrease  remain constant  so that it eventually  (Click to select)  occurs at a higher level than  returns to a level where it was  occurs at a lower level than  before the demand shift. There will be  (Click to select)  more  the same number of  fewer  firms in the industry. The long-run industry supply curve will be  (Click to select)  downward sloping  upward sloping  horizontal  .

Answer 1

In case of a decreasing cost industry the long run supply curve slops down suggesting that cost decrease overtime. Demand increase brings in short run profits and long run entry of firms which ultimately eliminates the economic profit in the long run. There are more firms now and each is producing less units