A sudden rise in the market demand in a competitive industry leads to
A)A short run market equilibrium price higher than the original equilibrium
B)A market equilibrium higher than the short run price
C)Some firms exiting the market
D)All of the above

Question

​A sudden rise in the market demand in a competitive industry leads to
A)​A short run market equilibrium price higher than the original equilibrium
B)A market equilibrium higher than the short run price
C)Some firms exiting the market
D)​All of the above

Quizplus · Accepted Answer

A sudden rise in market demand in a competitive industry will cause an increase in price and quantity demanded in the short run. As a result, the short run market equilibrium price will be higher than the original equilibrium. However, in the long run, new firms may enter the market and existing firms may increase their production, leading to a lower price and higher quantity supplied, and the market will eventually reach a new long run equilibrium. Therefore, choices B and C are not necessarily true.

​A Sudden Rise in the Market Demand in a Competitive

A Sudden Rise in the Market Demand in a Competitive