Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, which of the following statements is true in the long-run?

Question

Quizplus · Accepted Answer

In the long run, new firms will enter the market, increasing the supply and driving down the market price. As a result, both existing firms and new firms will earn zero economic profit. All firms will produce at the output where marginal cost equals price, which is $10 in this case.

Figure 6.5 -Figure 6.5 Shows the Short-Run and Long-Run Effects of an of an Increase