The Demand for a Product Produced in a Perfectly Competitive

question 147

Multiple Choice

The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price

• A) rises and each firm produces less output.
• B) rises and each firm produces more output.
• C) does not change as new firms enter the industry.
• D) does not change because each firm produces more output.

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Definitions:

Aggregate Supply

The total amount of goods and services that producers are willing and able to supply at different price levels in an economy over a specific time period.

Aggregate Demand

Total requirement for all products and services in an economy, factored at a certain overall price level during a designated period.

Price Level

The economy's wide-ranging average of prices for every produced good and service.

Price Level

An index of the average price of goods and services in an economy over a period, indicating inflation or deflation.