Assume That There Is an Outward Shift in the Demand

question 67

Multiple Choice

Assume that there is an outward shift in the demand for chairs.Which of the following best describes the short-run response within the competitive market for chairs?

• A)Existing firms and new firms will expand output by using more of all inputs.
• B)Existing firms will keep fixed inputs unchanged and expand output using the variable inputs.
• C)Existing firms will increase their profits by producing the same output at a higher price.
• D)Existing firms cannot increase production in the short-run so the price of chairs will increase.

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Definitions:

Expected Rate

Expected Rate often refers to the return that investors anticipate earning on an investment over a certain period.

Risk-Free Rate

The theoretical return on investment with no risk of financial loss, often represented by the yield on government bonds.

Actual Return

The real gain or loss experienced on an investment over a specified period, typically expressed as a percentage.

Overpriced

Refers to an asset or service that is being sold for a price higher than its perceived or intrinsic value.