Which of the following best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand curve would shift to the right, leading to:
A)a higher equilibrium price in the short run and entry into the market in the long run.
B)a higher equilibrium price in the short run and a permanent increase in economic profit.
C)no change in the short-run equilibrium price, and a higher long-run equilibrium quantity.
D)a lower short-run equilibrium price due to the entry of firms into the market.

Question

Quizplus · Accepted Answer

The demand shift increases price and leading to positive economic profit. In the long run, this economic profit will prompt new firms to enter the market.

Which of the Following Best Describes How a Perfectly Competitive