A decline in market demand in a competitive industry will result in a(n)_____

Question

Quizplus · Accepted Answer

A decline in market demand will lead to a decrease in the equilibrium quantity because at the original price, there is now less demand from consumers. This will cause a surplus, and firms will need to reduce the quantity of output to restore equilibrium. The other choices are incorrect because a decrease in demand will not lead to an increase in equilibrium price, economic profit for firms, or a rightward shift of the supply curve. While a decrease in demand may lead to a decrease in the number of firms in the industry in the long run, the question specifically refers to the short run.

A Decline in Market Demand in a Competitive Industry Will