When a competitive market experiences an increase in demand that induces an increase in producer costs,which consequence is most likely

Question

Quizplus · Accepted Answer

An increase in producer costs due to an increase in demand may lead to an upward shift in the short-run supply curve, resulting in higher prices and profits. In the long run, however, firms will enter the market, attracted by the higher profits, causing the market supply curve to shift to the right, which will drive prices back down to the original level. However, if producer costs have increased due to increased demand, then the long-run market supply curve will be upward sloping as it will cost more for suppliers to produce and supply the goods in the long run.

When a Competitive Market Experiences an Increase in Demand That