Figure 14-9
-Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b).An increase in demand from D0 to D1 will result in

Question

Figure 14-9  
-Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b).An increase in demand from D0 to D1 will result in

Quizplus · Accepted Answer

An increase in demand will initially raise prices and profits, attracting new firms to the market. This will eventually lead to a new long-run equilibrium at point C, where the number of firms has increased.