A sudden fall in the market demand in a competitive industry leads to
A)A short run market equilibrium price lower than the original equilibrium
B)A market equilibrium price higher than the short run price
C)Some firms exiting the market
D)All of the above

Question

​A sudden fall in the market demand in a competitive industry leads to
A)​A short run market equilibrium price lower than the original equilibrium
B)A market equilibrium price higher than the short run price
C)Some firms exiting the market
D)​All of the above

Quizplus · Accepted Answer

A sudden fall in market demand in a competitive industry will lead to a decrease in market price in the short run, as firms try to sell off excess inventory. However, in the long run, some firms will exit the market due to low profits, which will decrease supply and increase the market price. Therefore, the market equilibrium price will be higher than the short run price, and some firms will exit the market.

​A Sudden Fall in the Market Demand in a Competitive

A Sudden Fall in the Market Demand in a Competitive