Question

Assume a constant-cost industry that is initially in long-run competitive equilibrium. An increase in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________, which, in turn, will eventually cause the equilibrium price to be __________ before.

a. decrease; exit; leftward; lower than
b. increase; enter; rightward; higher than
c. decrease; exit; rightward; higher than
d. increase; enter; rightward; the same as
e. increase; exit; leftward; lower than

Answer 1

Option D is correct one.

increase; enter; rightward; the same as

Step-by-step explanation:

Assume a constant-cost industry that is initially in long-run competitive equilibrium. An increase in demand will cause a(n) increase in prices and profits, and as a result, firms will enter the industry, causing the market supply curve to shift rightward, which, in turn, will eventually cause the equilibrium price to be the same as before.