Harrison owns a flower shop. Generally, when preferences for a good rise, demand for the good rises. Holding all else constant, this will result in a higher market price, which will lead to _____ in the industry. The latter will in turn _____, leading the price to _____.
A)positive economic profits; attract new firms into; fall
B)economic losses; attract new firms into; fall
C)positive economic profits; cause some firms to leave; rise further
D)economic losses; cause some firms to leave; rise further

Question

Quizplus · Accepted Answer

When preferences for a good rise, demand increases, leading to higher prices and positive economic profits. This attracts new firms into the industry, increasing supply and eventually causing the price to fall.

Harrison Owns a Flower Shop