-Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product. The new long-run equilibrium will have

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a permanent increase in demand leads to higher prices and profits in the short run, attracting new firms into the market. In the long-run equilibrium, the entry of new firms increases supply, which lowers prices back to the level of minimum average cost, ensuring firms earn normal profit. Thus, the market ends up with more firms.

-Suppose a Perfectly Competitive Market Is in Long-Run Equilibrium and Then