Figure 14-14
-Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P1 to P2. Which of the following could explain this observation?
A)The entry of new firms into the market.
B)The exit of existing consumers from the market.
C)An increase in market supply from S0 to S1.
D)An increase in market demand from D0 to D1.

Question

Figure 14-14  
-Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P1 to P2. Which of the following could explain this observation?
A)The entry of new firms into the market. 
B)The exit of existing consumers from the market. 
C)An increase in market supply from S0 to S1. 
D)An increase in market demand from D0 to D1.

Quizplus · Accepted Answer

An increase in market demand from D0 to D1 would cause an increase in price from P1 to P2, while the other options would cause a decrease in price.