A sudden increase in the market demand in a competitive industry leads to
A)A market equilibrium profits higher than the original equilibrium in the short-run
B)A market equilibrium profits equal to the original equilibrium in the long-run
C)Both a and b
D)None of the above

Question

​A sudden increase in the market demand in a competitive industry leads to
A)​A market equilibrium profits higher than the original equilibrium in the short-run
B)A market equilibrium profits equal to the original equilibrium in the long-run
C)Both a and b
D)​None of the above

Quizplus · Accepted Answer

In the short run, a sudden increase in market demand can lead to higher profits as firms capitalize on the higher prices and increased demand. However, in the long run, the competitive nature of the industry will attract new firms, increasing supply and driving profits back down to the original equilibrium level.

​A Sudden Increase in the Market Demand in a Competitive

A Sudden Increase in the Market Demand in a Competitive