Asked by Jennifer Lawrence on Sep 24, 2024
Verified
A sudden fall in the market demand in a competitive industry leads to
A) A short run market equilibrium price lower than the original equilibrium
B) A market equilibrium price lower than the short run price
C) New firms entering the market
D) All of the above
Market Equilibrium
A situation in a market where the quantity of a product demanded by consumers equals the quantity supplied by producers, leading to a stable price.
Competitive Industry
An industry characterized by a large number of firms competing with each other to provide goods or services to consumers.
Market Demand
The total quantity of a product or service that consumers are willing and able to purchase at various prices during a specified time period.
- Gain an understanding of the adjustments in market equilibrium in the immediate and extended future, as a result of changes in supply and demand in competitive fields.
Verified Answer
FF
Fabienne Fleuranvil Merise4 days ago
Final Answer :
A
Explanation :
A sudden fall in market demand in a competitive industry will result in excess supply, which will lead to a decrease in the short run market equilibrium price. This is because firms will want to reduce their inventory by producing less output or reducing prices. However, in the long run, firms may exit the industry, leading to a decrease in supply and a new market equilibrium with a lower price than the original equilibrium. New firms may not enter the market due to the decrease in demand.
Learning Objectives
- Gain an understanding of the adjustments in market equilibrium in the immediate and extended future, as a result of changes in supply and demand in competitive fields.