A perfectly competitive,increasing cost industry is initially in long run equilibrium.Then,there is an increase in demand.Compared with the initial equilibrium,once the new long run equilibrium is reached:

Question

Quizplus · Accepted Answer

In a perfectly competitive, increasing cost industry, an increase in demand will lead to an increase in price in the short run. However, as firms enter the industry in response to the higher profit margins, the industry supply curve will shift outward and the price will eventually settle at the minimum point on the new long run average cost curve. This means that the price will be higher than before, but the total output will also be greater due to the entry of new firms. Therefore, the correct choice is A).

A Perfectly Competitive,increasing Cost Industry Is Initially in Long Run