Which of the following is the correct sequence of events following an increase in demand for a product in a perfectly competitive market?

Question

Quizplus · Accepted Answer

An increase in demand will lead to an increase in price in a perfectly competitive market. As a result, the representative firm will experience an increase in total profits. This will attract new firms to enter the industry, causing an increase in competition and a potential decrease in profits for all firms. Therefore, the correct sequence of events is an increase in price and total profits of the representative firm, followed by new firms entering the industry.

Which of the Following Is the Correct Sequence of Events