If demand increases in a perfectly competitive market,

Question

Quizplus · Accepted Answer

In a perfectly competitive market, demand is assumed to be external to the market and the market price is determined solely by supply and demand. An increase in demand will lead to a higher market price, and each firm in the short-run will try to produce more along its existing supply curve to earn more profits. This increase in production will lead to an increase in total output along the short-run market supply curve. Therefore, choice D is the best answer.

If Demand Increases in a Perfectly Competitive Market