If the demand for a product in an increasing cost perfectly competitive industry increases, we would expect that price in the long run would ________ and the number of firms in the market would ________.

Question

Quizplus · Accepted Answer

In an increasing cost industry, as demand increases, new firms enter the market, causing the supply curve to shift right. However, because it's an increasing cost industry, the costs of production for all firms increase as the industry expands. This leads to a higher long-run equilibrium price. The number of firms in the market increases because new firms are attracted by the higher prices and potential profits.

If the Demand for a Product in an Increasing Cost