Figure 9-10
-In Figure 9-10, the movement from points A to B to C can best be explained by which of the following factors?
A) a decrease in demand, followed by the entry of new firms and an expansion in supply in a constant cost industry.
B) an increase in demand, followed by the entry of new firms and an expansion in supply in an increasing cost industry.
C) a decrease in demand, followed by the exit of firms and a decline in supply in an increasing cost industry.
D) an increase in demand, followed by the exit of firms and a decline in supply in a constant cost industry.

Question

Figure 9-10 
-In Figure 9-10, the movement from points A to B to C can best be explained by which of the following factors?
A) a decrease in demand, followed by the entry of new firms and an expansion in supply in a constant cost industry. 
B) an increase in demand, followed by the entry of new firms and an expansion in supply in an increasing cost industry. 
C) a decrease in demand, followed by the exit of firms and a decline in supply in an increasing cost industry. 
D) an increase in demand, followed by the exit of firms and a decline in supply in a constant cost industry.

Quizplus · Accepted Answer

The movement from points A to B to C suggests an initial increase in demand, leading to higher prices and profits, which attracts new firms into the market. This results in an expansion of supply. In an increasing cost industry, the entry of new firms raises input costs, causing the supply curve to shift less than proportionately to the right, stabilizing prices at a higher level.

Figure 9-10 -In Figure 9-10, the Movement from Points a to B