If the demand curve in an increasing cost market shifts up and to the right, then:
A)the long run price goes up and the long run quantity goes up.
B)the short run price goes up and the short run quantity stays the same.
C)the long run price stays the same and the long run quantity goes up.
D)the short run price stays the same and the short run quantity goes up.

Question

Quizplus · Accepted Answer

In an increasing cost market, as demand shifts up and to the right, the cost of production also increases. In the long run, the firms will adjust their production to the higher cost, resulting in a higher price and a higher quantity produced. Therefore, the best choice is A, as it reflects the long run effects. The other choices consider only the short run effects, which are not relevant in this case.

If the Demand Curve in an Increasing Cost Market Shifts