Which of the following will occur in response to an unexpected increase in demand in a constant-cost,competitive industry?
A)Resources will move out of the industry.
B)The output of the industry will remain constant.
C)The output will increase with input prices remaining unchanged
D)The existing firms will not be able to expand output sufficiently without incurring huge costs.

Question

Quizplus · Accepted Answer

In a constant-cost, competitive industry, an unexpected increase in demand will lead to an increase in output with input prices remaining unchanged. The industry can expand output without incurring significant costs since resources are readily available at the same price. The existing firms can increase their production levels, and new firms can also enter the market without impacting the resource prices, ensuring a competitive market. Option A is incorrect because resources will not move out of the industry due to the constant-cost structure of the industry. Option B is incorrect because an increase in demand will require an increase in output to meet the demand. Option D is incorrect because the existing firms can expand their output levels without incurring significant costs.

Which of the Following Will Occur in Response to an Unexpected