Which of the Following Best Describes How a Perfectly Competitive

question 99

Multiple Choice

Which of the following best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand curve would shift to the right, leading to:

• A)a higher equilibrium price in the short run and entry into the market in the long run.
• B)a higher equilibrium price in the short run and a permanent increase in economic profit.
• C)no change in the short-run equilibrium price, and a higher long-run equilibrium quantity.
• D)a lower short-run equilibrium price due to the entry of firms into the market.

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Definitions:

Buying Power

The ability of individuals or entities to purchase goods and services, often influenced by income levels, inflation, and market conditions.

Domestic Currency

The legal tender or currency that is circulated for use and accepted for exchange within the domestic economy of a country.

Dollarization

The process of a country adopting the US dollar as its primary currency, either officially or unofficially, alongside or in place of its own national currency.

Foreign Currency

Money or currency used in a country other than one's own.