Figure: Industry Firms Reference: Ref 11-9 (Figure: Industry Firms)

Figure: Industry Firms Reference: Ref 11-9 (Figure: Industry Firms) Use the figures. The market for a normal good is characterized by demand curve D2 and supply curve S2. A decrease in income will cause:

A) the demand curve to shift D1 causing firms to earn economic profits. The supply curve will not change, so price will rise and firms will earn normal profits.
B) the supply curve to shift D1 causing firms to earn economic profits. The supply curve will decrease to S1 as firms exit the industry. Eventually the market price will rise and firms will earn above normal profits.
C) the demand curve to shift D1 causing firms to earn economic losses. The supply curve will decrease to S1 as firms exit the industry. Eventually the market price will rise and firms will earn normal profits.
D) the supply curve to shift S1 causing firms to earn economic losses. The demand curve will decrease to D1 as firms enter the industry. Eventually the market price will fall and firms will earn normal profits.