When market demand increases in a competitive industry,
A)the number of firms increases, causing short-run market supply to increase.
B)firms become less efficient.
C)firms' marginal cost curves shift to the right.
D)economic profits stay at zero because of competition.
E)market price increases, making it possible for ATC curves to shift up.

Question

Quizplus · Accepted Answer

When market demand increases, it typically leads to higher prices and profits in the short run, attracting new firms to enter the industry, which increases the number of firms and the short-run market supply.

When Market Demand Increases in a Competitive Industry