Beginning from a point of long-run equilibrium, an increase in the market demand for wheat would result in
A) an increase in the market price of wheat.
B) existing wheat producers increasing output in the short run and earning positive economic profits.
C) new firms entering the wheat industry in the long run.
D) all of the above.

Question

Quizplus · Accepted Answer

An increase in market demand for wheat would lead to an increase in the market price of wheat, as there would be more buyers willing to pay a higher price for wheat. Existing wheat producers would increase their output in the short run, as they can capitalize on the higher prices to earn positive economic profits. In the long run, new firms would enter the market, as the profits earned by existing firms would attract new entrants, leading to a shift in the supply curve to the right, and ultimately resulting in a new long-run equilibrium.

Beginning from a Point of Long-Run Equilibrium, an Increase in the Market