In Both Price-Taker and Competitive Price-Searcher Markets, When an Increase

question 70

Multiple Choice

In both price-taker and competitive price-searcher markets, when an increase in market demand disrupts a long-run equilibrium, it will lead to

• A) higher short-run prices and long-run profits.
• B) higher short-run prices, short-run profits, and the entry of additional firms into the market.
• C) higher short-run prices and the exit of firms from the market due to economies of scale.
• D) no change in prices in the short run, but new firms will enter in the long run.

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Definitions:

Market Rate Of Interest

The prevailing rate of interest determined by supply and demand in the credit market.

Profit Per Barrel

The net income a company earns for each barrel of oil or similar commodities produced or processed.

Present Value

The contemporary valuation of a future lump sum or cash flow sequence, based on a chosen rate of earnings.

Nonrenewable Resource

A natural resource that cannot be replaced once it is consumed, such as oil, natural gas, and coal.