Final answer:
A shift in the demand curve has a larger effect on price and a smaller effect on quantity when the number of firms is fixed compared to when free entry and exit is permitted.
Step-by-step explanation:
When the number of firms is fixed in a market, a shift in the demand curve will have a larger effect on price and a smaller effect on quantity. This is because with a fixed number of firms, the supply in the market is relatively less flexible. When demand increases, the price will rise more significantly as the supply cannot easily adjust to meet the higher demand. On the other hand, the quantity supplied will only increase marginally as the fixed number of firms cannot easily expand their production capacity.