Which ordering best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand function will shift to the right,causing the market:
A)price to increase,and a new stable equilibrium to be established at a higher price and higher quantity.
B)price to increase,and all firms in the industry will earn higher profits for the foreseeable future.
C)price to increase.Increased profits will encourage new firms to enter,shifting the market supply function to the right.Long-run market equilibrium will be at a higher quantity than before the surge in popularity.
D)price and quantity supplied to increase.Increased profits will encourage new firms to enter shifting the market supply function upward.Long-run market equilibrium will be at a lower quantity and higher price than before the surge in popularity.

Question

Quizplus · Accepted Answer

The demand shift increases price and so profits.Profits attract new entry,increasing quantity produced.

Which Ordering Best Describes How a Perfectly Competitive Industry Would