Assume there is an increase in demand in a perfectly competitive market that was initially in long-run equilibrium.Which of the following statements is false?

Question

Quizplus · Accepted Answer

When there is an increase in demand in a perfectly competitive market that is initially in long-run equilibrium, the price will rise in the short run, leading to higher profits for firms. However, as new firms enter the market in the long run, the market supply curve will shift right, leading to lower prices and normal profits in the long run. Therefore, profits will be higher than normal in the short run, not lower.

Assume There Is an Increase in Demand in a Perfectly