Graph 14-9
-Refer to Graph 14-9.When a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P₁ to P₂, it is most likely the result of:

Question

Graph 14-9 
-Refer to Graph 14-9.When a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P₁ to P₂, it is most likely the result of:

Quizplus · Accepted Answer

If the market price is rising, it means that there is an increase in the equilibrium quantity and the demand curve has shifted to the right from DemanD₀ to DemanD₁. This would cause an increase in the market price from P₁ to P₂ as shown in the graph. There is no indication of a change in supply or the number of firms in the market, so options A, C, and D can be ruled out.