Suppose that an increase in population increases demand in New Haven County's perfectly competitive market for auto repair.Which of the following is true in the short run?
A)Auto repair centers may be able to earn economic profit.
B)Normal profits increase.
C)The market supply curve of auto repair services shifts to the left.
D)Either price or output is likely to increase, but it's impossible to say which.
E)After firms have had time to adjust to the new equilibrium, the price of auto repair services will exceed the marginal cost.

Question

Quizplus · Accepted Answer

In the short run, an increase in demand can lead to higher prices, allowing firms to earn economic profits before new firms enter the market and drive profits back to normal levels.

Suppose That an Increase in Population Increases Demand in New