Which of the following events does NOT occur when market demand shifts leftward in an increasing-cost industry?
A) Initially, the output produced by existing firms declines along the short-run market supply curve.
B) The market price declines below the minimum LAC due to the short-run supply response.
C) The market supply curve shifts leftward as some firms exit the market when the market price is below the minimum LAC.
D) As firms exit, the market price rises and attracts other firms to enter the market.
E) The LAC curve shifts downward as output falls.

Question

Quizplus · Accepted Answer

When market demand shifts leftward in an increasing-cost industry, firms exit the market due to lower prices, which can lead to a higher market price due to reduced supply. However, this scenario does not attract new firms to enter the market because the demand has decreased, not increased. The correct response to decreased demand is a market contraction, not expansion.

Which of the Following Events Does NOT Occur When Market