Exhibit 23-9

-Refer to Exhibit 23-9.Following an increase in market demand from D₁to D₂,the firm's profits in the short run will

Question

Exhibit 23-9 -Refer to Exhibit 23-9.Following an increase in market demand from D₁to D₂,the firm's profits in the short run will

Quizplus · Accepted Answer

In the short run, the firm cannot change its fixed costs and can only adjust its output level. Therefore, the firm's profits will increase by the difference between the new price (P₂) and the old price (P₁), multiplied by the increase in quantity sold (q₂ - q₁). However, the increase in profits may be less than this amount if the marginal cost of producing the additional quantity is higher than the current price. Therefore, option C is the best choice since it reflects this possibility.

Exhibit 23-9 -Refer to Exhibit 23-9.Following an Increase in Market Demand from in Market