Which of the Following Is the Correct Sequence of Events

question 16

Multiple Choice

Which of the following is the correct sequence of events following an increase in demand for a product in a perfectly competitive market?

• A)A decrease in the price and in the total profits of the representative firm which causes new firms to enter the industry.
• B)An increase in the price and in the total profits of the representative firm which causes firms to leave the industry.
• C)An increase in the price and in the total profits of the representative firm which causes new firms to enter the industry.
• D)An increase in the price but a decrease in the total profits of the representative firm which causes firms to leave the industry.

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Definitions:

Marginal Revenue

The additional income received from selling one more unit of a good or service, critical for determining optimal production levels.

Average Revenue

The amount of income a business receives per unit of goods or services sold, calculated by dividing total revenue by the quantity sold.

Total Revenue

The total income received by a firm from selling its products; calculated by multiplying the price per unit by the number of units sold.

Market Price

The current price at which an asset or service can be bought or sold in a particular market, determined by the supply and demand for it.