Question

Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be

Answer 1

After all resulting adjustments have been completed, the new equilibrium price will less than the initial price and output. The same will happen to the industry output. In each situation in which an increase in product demand occurs in a decreasing-cost industry the result is: the new long-run equilibrium price is lower than the original long-run equilibrium price.