Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4
There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S 0 and D 0.
-Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, sector X will likely see ________ and sector Y will likely see ________.
A) the entrance of new firms; the exit of existing firms
B) the exit of existing firms; the entrance of new firms
C) the entrance of new firms; no entry or exit of firms
D) no entry or exit of firms; the exit of existing firms

Question

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow.  Figure 12.4
There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S 0 and D 0. 
-Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, sector X will likely see ________ and sector Y will likely see ________.
A) the entrance of new firms; the exit of existing firms 
B) the exit of existing firms; the entrance of new firms 
C) the entrance of new firms; no entry or exit of firms 
D) no entry or exit of firms; the exit of existing firms

Quizplus · Accepted Answer

When consumer preference shifts toward X and away from Y, demand for X increases, making it more profitable and likely attracting new firms. Conversely, Y will see reduced demand, making it less profitable and likely leading to the exit of existing firms.

Refer to the Information Provided in Figure 12