When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

Question

Quizplus · Accepted Answer

In perfect competition, increased demand initially raises prices and profits, attracting new firms. However, in the long run, the entry of new firms increases supply, driving prices back down to the level of average costs, eliminating economic profits.

When the Market Demand Increases in a Perfect Competition, the Long-Run