If price exceeds average total cost in the short run,then in the long run the market demand curve will shift to the right.

Question

Quizplus · Accepted Answer

The statement is not true. If a firm is earning above-average profits in the short run, it may attract new entrants to the market, which can shift the supply curve to the right and decrease the price in the long run. This may cause the firm's profits to decrease or even become losses. However, the market demand curve is not directly affected by the firm's short-run profitability.

If Price Exceeds Average Total Cost in the Short Run,then