If the demand increases in a perfectly competitive market,firms will likely:

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms cannot set prices above the market price, so they cannot increase prices permanently. However, with an increase in demand, prices will rise temporarily due to the limited supply, which will attract new firms to enter the market in search of profits. Therefore, the most likely outcome is that firms will enter the market in hopes of capturing some of the higher demand and profits.

If the Demand Increases in a Perfectly Competitive Market,firms Will