Use the following to answer questions: Figure: Industry Firms -(Figure: Industry Firms) Refer to the figures. The market is characterized by demand curve D₂ and supply curve S₁. The firms in the industry are earning ________, which will cause the______________. A) profit; supply curve to shift to S₂ B) losses; demand curve to shift to D₁ C) profit; supply curve to shift to S₂ and the demand curve to shift to D₁ D) losses; supply curve to shift to S₂ and the demand curve to shift to D₁

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The firms are earning profit, which attracts new firms into the market, causing the supply curve to shift to the right, from S₁ to S₂.

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