Assume the market for orange juice is perfectly competitive. Orange juice producers currently earn a zero economic profit. Orange juice producers will likely begin to earn economic profits in the short run, and some producers will enter the industry until all firms in the industry earn a zero economic profit, if consumers
A) switch from grape juice to orange juice.
B) switch from orange juice to grape juice.
C) do not change their demand for orange juice.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

If consumers switch from grape juice to orange juice, the demand for orange juice will increase. In a perfectly competitive market, an increase in demand leads to higher prices and profits in the short run. This attracts new producers into the market until the increased supply brings prices down again, restoring the zero economic profit equilibrium.

Assume the Market for Orange Juice Is Perfectly Competitive