Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,
A)the long-run market supply curve will be upward sloping.
B)the long-run market supply curve will be perfectly elastic.
C)in the long run firms will suffer economic losses, leading them to exit the industry.
D)the number of firms will decrease, and the market will become a monopoly.

Question

Quizplus · Accepted Answer

In a competitive market with free entry and exit, if firms face the same costs and resources are available, the long-run market supply curve is perfectly elastic, as firms can enter or exit until economic profits are zero.

Suppose That a Competitive Market Is Initially in Equilibrium