If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause ?
Correct answer: A. an increase in the number of firms in the market but no increase in the price of the good
- A. an increase in the number of firms in the market but no increase in the price of the good
- B. an increase the price of the good and an increase in the number of firms in the market
- C. an increase the price of the good but no increase in the number of firms in the market
- D. no impact on either the price of the good or the number of firms in the market
Explanation
With perfectly elastic long-run supply, the market price remains fixed after demand increases. The higher demand is met by entry and an increase in the number of firms.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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