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:

Fixed Assets

Long-term tangible assets held for business use and not expected to be converted to cash in the upcoming fiscal year, such as buildings, machinery, and equipment.

Full Capacity

The maximum level of output that a company can sustain over a long period without increasing its production resources or incurring excessive stress on its production processes.

Region of Residence

Refers to the specific geographic area where an individual currently lives or resides.

Income

The monetary payment received for labor, services, or investment, usually measured on a weekly, monthly, or yearly basis.