A perfectly competitive industry is in long-run equilibrium. If demand for the product increases, we can expect the price of the good to

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, an increase in demand initially raises the price due to the immediate excess demand. Over time, the higher profits attract new firms into the industry, increasing supply until the price falls back to the original equilibrium, assuming constant costs.

A Perfectly Competitive Industry Is in Long-Run Equilibrium