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3 March, 11:06

If all firms in a competitive industry are legally required to meet new regulations that increase their costs of production, what happens to the good's:

a. demand

b. supply

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Answers (1)
  1. 3 March, 11:19
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    If all firms in a competitive industry are legally required to meet new regulations that increase their costs of production, the supply of goods would decrease.

    Explanation:

    In order to comply with the new regulations in place and still keep the business profitable, the businesses would choose to decrease production in order to keep the initial cost of production in control (or in the range that it was in before the introduction of new regulations). The firms would take steps in order to avoid market fluctuation and the step of decreasing the production of goods to keep the price stable would be one of those steps.
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