If the Ice Cream Industry Is a Competitive Price-Taker Market

question 14

Multiple Choice

If the ice cream industry is a competitive price-taker market and all ice cream producers are earning zero economic profit, what will be the impact of an increase in the demand for ice cream?

• A) Firms will exit the ice cream industry in the long run since they are earning zero economic profit.
• B) The firms will now be able to earn long-run economic profit assuming that barriers to entry remain low and new firms can enter the market.
• C) A shortage of ice cream will develop.
• D) The price of ice cream will rise initially, inducing the existing firms to expand output and new firms to enter the industry.

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Definitions:

Alfred Kinsey

An American biologist and sexologist who founded the Institute for Sex Research at Indiana University and is known for his research on human sexual behavior.

Ejaculation

The release of semen from the male reproductive system, often occurring at the climax of sexual arousal.

Spermarche

In boys, the development of sperm in the testicles.

Testicles

Male reproductive glands responsible for producing sperm and testosterone.