When a competitive market experiences an increase in demand that induces an increase in producer costs, which of the following is most likely to occur?

Question

Quizplus · Accepted Answer

When demand increases in a competitive market, it can lead to higher prices and potentially higher profits in the short run, attracting new firms into the market. This increase in production to meet the higher demand can lead to an increase in the costs of inputs as firms compete for resources, which can make the long-run market supply curve upward sloping. This is because, in the long run, the costs associated with producing additional units of a good can increase as firms expand their production levels. Choices A and C are not necessarily true outcomes of an increase in demand leading to increased producer costs.

When a Competitive Market Experiences an Increase in Demand That