Consider the market for home cleaning services. There are many homeowners who hire people to clean their houses and many people who provide home cleaning services. Thus, we can consider this a perfectly competitive market. Since there isn't really any proprietary technology in home cleaning, we can assume that each home cleaning company is basically identical and has the same cost curves.

In this market the quantity is measured by the number of houses cleaned and prices and costs are measured in dollars per house.

Suppose that this market is initially in a long-run equilibrium. Then, due to a change in labor laws, the fixed costs of operating a house cleaning business go down. Assume no other changes in this market.

In the new short-run equilibrium, how will this change affect: The market price:

A. Goes Down

B. Goes up

C. Unchanged

D. it cannot be determined

The market quantity:

A. Goes Down

B. Goes up

C. Unchanged

D. it cannot be determined

The quantity of houses each individual company decides to clean:

A. Goes Down

B. Goes up

C. Unchanged

D. it cannot be determined

The profits of each individual house cleaning company:

A. Goes Down

B. Goes up

C. Unchanged

D. it cannot be determined

Assume that this change in fixed costs lasts for a long time and that entry and exit into this industry is easy. Compared to the starting point before any changes in fixed costs, once the market has adjusted to a new long-run equilibrium, what will be true about the following variables?

The market price:

A. higher than it was before any changes

B. lower than it was before any changes

C. same as what it was before any changes

D. it cannot be determined

D. it cannot be determined

The market quantity:

A. higher than it was before any changes

B. lower than it was before any changes

C. same as what it was before any changes

D. it cannot be determined

The quantity of houses each individual company decides to clean:

A. higher than it was before any changes

B. lower than it was before any changes

C. same as what it was before any changes

D. it cannot be determined

The profits of each individual house cleaning company:

A. higher than it was before any changes

B. lower than it was before any changes

C. same as what it was before any changes

D. it cannot be determined

The number of house cleaning firms:

A. higher than it was before any changes

B. lower than it was before any changes

C. same as what it was before any changes

D. it cannot be determined