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:

Carbon Dioxide Emissions

Carbon dioxide emissions are the release of CO2 into the atmosphere, primarily from burning fossil fuels, which contribute to global warming and climate change.

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making someone else worse off, ensuring that resources are used for producing the goods and services most desired by society.

Willingness to Pay

The maximum amount an individual is ready to spend on a good or service, reflecting the value the consumer places on it.

Supply-Side Market Failures

Situations where the production or supply side of the market does not efficiently allocate resources due to externalities or other market imperfections.