Figure 14-7

-Refer to Figure 14-7.Assume that the market starts in equilibrium at point A in panel (b).An increase in demand from Demand₀ to Demand₁ will result in

Question

Figure 14-7
 
-Refer to Figure 14-7.Assume that the market starts in equilibrium at point A in panel (b).An increase in demand from Demand₀ to Demand₁ will result in

Quizplus · Accepted Answer

An increase in demand will initially raise prices and profits, attracting new firms to the market. This entry of new firms will eventually lead to a new long-run equilibrium at point C, where prices and profits stabilize.

Figure 14-7 -Refer to Figure 14-7.Assume That the Market Starts in Equilibrium