An increase in demand in a perfectly competitive industry characterized by constant costs will cause a(n):

Question

Quizplus · Accepted Answer

In the short run, the increase in demand will lead to an increase in the quantity supplied, causing prices to increase. In the long run, however, new firms will enter the industry to take advantage of the increased prices, which will increase the market supply and lower prices back to the previous level. Since the industry is characterized by constant costs, there will not be any economic losses for firms. Marginal revenue may decrease, but this is not specified in the question.

An Increase in Demand in a Perfectly Competitive Industry Characterized