The market for plumbing services in a city can be characterized by the model of monopolistic competition.Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services.We expect that in the short run the price:

Question

Quizplus · Accepted Answer

In a monopolistic competition market, firms can differentiate their products, allowing them to increase their market power to some extent. Therefore, an increase in demand will likely result in firms raising their prices and increasing their output in the short run to meet the higher level of demand. As a result, the price and output of plumbing services will rise.

The Market for Plumbing Services in a City Can Be