When Market Demand Increases in a Competitive Industry

question 100

Multiple Choice

When market demand increases in a competitive industry,

• A)the number of firms increases, causing short-run market supply to increase.
• B)firms become less efficient.
• C)firms' marginal cost curves shift to the right.
• D)economic profits stay at zero because of competition.
• E)market price increases, making it possible for ATC curves to shift up.

---

Definitions:

Incremental Manufacturing Cost

The additional cost incurred to produce an extra unit of a product.

Contribution Format Income Statement

A format for income statements that divides fixed and variable expenses, emphasizing the margin of contribution.

Traditional Format Income Statement

A type of income statement where expenses are deducted from revenues to calculate net income, typically divided into operating and non-operating sections.

Fixed Selling Expense

refers to selling costs that do not vary with the volume of sales, including salaries of sales personnel and advertising expenses.