A sudden fall in the market demand in a competitive industry leads to
A)A short run market equilibrium price lower than the original equilibrium
B)A market equilibrium price lower than the short run price
C)New firms entering the market
D)All of the above

Question

​A sudden fall in the market demand in a competitive industry leads to
A)​A short run market equilibrium price lower than the original equilibrium
B)A market equilibrium price lower than the short run price
C)New firms entering the market
D)​All of the above

Quizplus · Accepted Answer

A sudden fall in market demand in a competitive industry will result in excess supply, which will lead to a decrease in the short run market equilibrium price. This is because firms will want to reduce their inventory by producing less output or reducing prices. However, in the long run, firms may exit the industry, leading to a decrease in supply and a new market equilibrium with a lower price than the original equilibrium. New firms may not enter the market due to the decrease in demand.

​A Sudden Fall in the Market Demand in a Competitive

A Sudden Fall in the Market Demand in a Competitive