Asked by Victoria Rodriguez on Jun 23, 2024
Verified
Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?
A) Points W, Y, and Z represent both short-run and long-run equilibria.
B) Points W, Y, Z, and X represent short-run equilibria.
C) Points W, Y, and Z represent long-run equilibria.
D) Points W and Z represent long-run equilibria.
Long-Run Equilibria
A state in economics where all factors of production and costs are variable, and firms make decisions to maximize profits without any fixed inputs.
Demand Increases
A situation in which the desire and ability of consumers to purchase a good or service grow, typically leading to higher prices and potentially greater supply.
Market Supply
The total amount of a specific good or service that is available to consumers at current prices in a given market.
- Explore the repercussions of changes in market demand on the behavior of businesses and the equilibrium within the market across short and lengthy durations.
Verified Answer
EC
Emmy ChepkiruiJun 30, 2024
Final Answer :
D
Explanation :
Points W and Z represent long-run equilibria because in the long run, firms will enter or exit the market until economic profits are zero, which occurs at points where the demand curve is tangent to the average total cost curve.
Learning Objectives
- Explore the repercussions of changes in market demand on the behavior of businesses and the equilibrium within the market across short and lengthy durations.