When a Competitive Market Experiences an Increase in Demand That

question 44

Multiple Choice

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants, which of the following is most likely to arise?

• A)The long-run market supply curve will be upward sloping.
• B)The condition of free entry into the market will be violated.
• C)Producer profits will fall in the long run.
• D)The long-run market supply curve will be horizontal as new firms enter and drive the price downward.

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Definitions:

Consumption

The use of goods and services by households or individuals, typically considered as the end phase in the economic cycle of production, distribution, and use.

Satisfaction

The fulfilment of one’s wishes, expectations, or needs, or the pleasure derived from this.

Marginal Utility

The additional satisfaction or happiness gained from consuming an additional unit of a good or service.

Paint

A substance used to apply color or protection, consisting of pigment suspended in a liquid or paste medium such as oil or water.