Suppose That the Market for Candy Canes Operates Under Conditions

Multiple Choice

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Based on the information given, we can conclude that once all the adjustments to long-run equilibrium are achieved, the price of candy canes will equal:

A) five cents.
B) ten cents.
C) fifteen cents
D) It is impossible to answer without knowing exactly how many firms entered and/or left the industry.