Figure 9-17
The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 9-17.Which of the following statements is true?

Question

Figure 9-17
  The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 9-17.Which of the following statements is true?

Quizplus · Accepted Answer

The supply curve intersects the demand curve at a price of $3, which is the current market price. However, the long-run equilibrating process in a perfectly competitive market involves entry and exit of firms in response to profits or losses. As new firms enter the market, the supply curve shifts rightward, causing a fall in equilibrium price in the long run. Therefore, the current market price of $3 will fall in the long run as new firms enter the market. Option A is incorrect because the graph does not show any indication that the firm will be able to increase the price in the future. Option B is incorrect because there is no indication in the graph of a decrease in demand. Option D is incorrect because there is no indication in the graph of an increase in market demand.

Figure 9-17 the Graphs in Figure 9-17 Represent the Perfectly