Suppose that demand increases. If the total cost curves for the firms do not change with the number of firms:

Question

Quizplus · Accepted Answer

When demand increases, the total market quantity and the number of firms in the market will increase to meet the higher demand. However, the minimum average total cost and the equilibrium price do not change because these are determined by the cost structures of the firms and the market supply and demand equilibrium, respectively, which are not directly affected by the increase in demand. The output per firm does not necessarily change; it depends on how the increased market quantity is distributed among the existing and new firms.

Suppose That Demand Increases