A perfectly competitive industry with constant costs initially operates in long-run equilibrium.When demand increases, one will observe that:
A.in the short run, prices and profits will be higher, but in the long run, price will fall back to its original level and firms will again earn zero economic profit.
B.in the long and short runs, prices and profits will be higher relative to what they were before the demand increase.
C.in the short run, prices and profits will fall, but in the long run, price will rise back to its initial level, as will profits.
D.in the long and short runs, prices and profits will be lower relative to what they were before the demand increase.
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