Which Ordering Best Describes How a Perfectly Competitive Industry Would

question 67

Multiple Choice

Which ordering best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand function will shift to the right,causing the market:

• A)price to increase,and a new stable equilibrium to be established at a higher price and higher quantity.
• B)price to increase,and all firms in the industry will earn higher profits for the foreseeable future.
• C)price to increase.Increased profits will encourage new firms to enter,shifting the market supply function to the right.Long-run market equilibrium will be at a higher quantity than before the surge in popularity.
• D)price and quantity supplied to increase.Increased profits will encourage new firms to enter shifting the market supply function upward.Long-run market equilibrium will be at a lower quantity and higher price than before the surge in popularity.

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Definitions:

Right-to-work Laws

Legislation that prohibits compulsory union membership as a condition of employment, allowing individuals to work without being forced to join a union.

Unionized Firm

A company where the workforce is represented by a union in negotiations regarding employment terms.

Supply Of Labor

The total hours that workers wish to work at a given wage rate, representing the workforce available for employment.

Unionized

A condition where employees are organized into unions to collectively bargain with employers over wages, benefits, and working conditions.