Refer to the information provided in Figure 9.7 below to answer the questions that follow. Figure 9.7
-Refer to Figure 9.7. If demand for wheat is D3, then in the long run
A) the firm will shut down.
B) the firm will exit the industry.
C) new firms will enter the industry, and the current firms will expand production.
D) None of the above is correct.

Question

Refer to the information provided in Figure 9.7 below to answer the questions that follow.  Figure 9.7
-Refer to Figure 9.7. If demand for wheat is D3, then in the long run
A) the firm will shut down. 
B) the firm will exit the industry. 
C) new firms will enter the industry, and the current firms will expand production. 
D) None of the above is correct.

Quizplus · Accepted Answer

If demand increases to D3, the price of wheat will increase, making it more profitable for firms to enter the industry or for current firms to expand production. In the long run, this will lead to an increase in market supply and potentially lower prices. So, new firms will enter the industry and current firms will expand production. The options A and B are not viable because the question assumes a long-run scenario, which allows for adjustments to occur in the industry.

Refer to the Information Provided in Figure 9