An increase in demand in a perfectly competitive market will cause a(n):

Question

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In a perfectly competitive market, firms cannot charge a price higher than the market price. Therefore, an increase in demand will lead to an increase in the market price in the short run, but in the long run, new firms will enter the market, increasing supply, and reducing the price back to the old level. In a constant-cost industry, the increase in demand will not lead to a decrease in firms' profits, as there will be no increase in input costs. Thus, in the short run, firms will earn economic profits.

An Increase in Demand in a Perfectly Competitive Market Will