If there is an increase in market demand in a perfectly competitive market, then in the short run prices will
A)rise.
B)remain unchanged at the minimum of average total cost.
C)fall.
D)remain unchanged at the minimum of marginal cost.

Question

Quizplus · Accepted Answer

In the short run, with an increase in market demand, prices will rise as the quantity supplied is fixed, and hence, the firms selling in the market will be able to sell their output at a higher price due to increased demand. This occurs because new entrants cannot enter the market in the short run to increase the quantity supplied, maintaining the fixed supply, and resulting in a rise in prices.

If There Is an Increase in Market Demand in a Perfectly