Figure: Supply and Demand the Figure Depicts a Constant

question 93

Multiple Choice

Figure: Supply and Demand The figure depicts a constant cost industry. What happens if there is an increase in demand?

• A) The price of the product stays at $10, although there may be a temporary shortage in the short run.
• B) The price initially increases above $10 in the short run, but the entry of new firms and expansion of existing firms will push the long run price back down to $10.
• C) The price initially increases above $10 in the short run, but the increased demand for resources will drive the long run price up even higher.
• D) The price of the product stays at $10 in the short run, and then decreases as new firms enter the industry.

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Definitions:

Recentering

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The status of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses.

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The family unit in which a person is born or brought up, which significantly influences their development and behavior.

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