Figure 6.5 -Figure 6.5 Shows the Short-Run and Long-Run Effects of an of an Increase

question 201

Multiple Choice

Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, which of the following statements is true in the short-run?

• A)The market price rises to $12, which is greater than the average total cost.
• B)Each existing firm maximizes its profit by producing the output where marginal cost equals $12.
• C)Each existing firm produces two more units per hour, compared to its initial profit maximizing output level at point A.
• D)all of the above

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Definitions:

Size Constancy

The perception that an object's size remains the same despite changes in the distance from which it is viewed.

Perceive

The process of becoming aware or conscious of something through the senses.

Different Angles

Various perspectives or viewpoints from which a subject or problem can be examined or considered.

Perceptual Development

The process by which infants and young children gain the ability to interpret and understand sensory input.