Asked by Scott Saunders on Sep 24, 2024
Verified
A sudden rise in the market demand in a competitive industry leads to
A) A short run market equilibrium price higher than the original equilibrium
B) A market equilibrium lower than the short run price
C) Entry of new firms into the market
D) All of the above
Competitive Industry
A market sector characterized by many firms competing against each other for customers, leading to innovation and lower prices.
Market Demand
The total quantity of a particular good or service that all consumers in a market are willing and able to purchase at various prices.
- Understand the transformations in short-term and long-term market equilibrium resulting from demand and supply variations in competitive contexts.
- Pinpoint the causes facilitating the introduction and withdrawal of businesses in a competitive industry setting.
Verified Answer
AA
Arianna Araujoabout 2 hours ago
Final Answer :
D
Explanation :
A sudden rise in market demand in a competitive industry typically results in a short-run increase in market equilibrium price due to the immediate increase in demand. Over time, this higher price and potential profits attract new firms into the market, increasing supply and potentially leading to a new equilibrium price that could be lower than the short-run high but still higher than the original equilibrium. Thus, all of the provided options are correct outcomes of a sudden rise in market demand.
Learning Objectives
- Understand the transformations in short-term and long-term market equilibrium resulting from demand and supply variations in competitive contexts.
- Pinpoint the causes facilitating the introduction and withdrawal of businesses in a competitive industry setting.