Assume a constant-cost industry in a competitive market. What are the long-term effects of the following change?An increase in fixed costs will the equilibrium price and equilibrium quantity in the market.
a) Not change; not change
b) Increase; decrease
c) Decrease; increase
d) Not change; increase

The correct answer is: d) Not change; increase.

Explanation:

Constant costs is an expression of the economy that refers to a way of estimating the monetary value of certain economic figures and economic indicators.

It is a periodic cost that remains more or less unchanged, regardless of the level of production or sales revenue, such as depreciation, insurance, interest, rent, and wages.

While in practice, all costs vary over time and no cost is a purely fixed cost, the concept of fixed costs is necessary in short-term cost accounting. Organizations with high fixed costs are significantly different from those with high variable costs. This difference affects the financial structure of the organization, as well as its prices and profits. The breakeven point in such organizations (compared to organizations with high variable cost) is typically at a much higher level of production, and their marginal benefit (contribution rate) is also much higher.

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