Answer:
Explanation:
The lunch plate industry in Oahu is a perfectly competitive industry. Â
This industry is also a decreasing cost industry. A decreasing cost industry can be defined as the type of industry where an increase in the number of firms in the industry causes the average production cost to decline. Â
The industry is currently in long-run equilibrium and has the price level at $5.
As the demand increases, the price level will initially increase. But this increase in the price will cause the profits to increase and thus attract potential firms to join the market. Â
As the number of firms increases the average cost of production will decrease. As a result, the supply in the market will increase more than the demand. Â
So the long-run equilibrium will be reestablished at a lower price than earlier.
