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:

Fixed Costs

Fixed Costs are business expenses that do not change with the level of goods or services produced by the company.

Marginal Cost

The additional cost incurred by producing one more unit of a good or service.

Total Variable Cost

The total of all variable expenses which change with the level of output.

Economic Consultant

A professional who provides expert advice on economic matters, including analysis, forecasting, and policy recommendations.