Asked by Jesse Mad3329 on Jul 04, 2024
Verified
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
Market Equilibrium
A condition in a market where supply equals demand, resulting in stable prices that neither increase nor decrease.
Competitive Industry
An economic environment where multiple businesses compete against one another, fostering innovation and efficiency to attract customers.
Market Demand
The aggregate amount of a product or service that every consumer in a market is prepared and capable of buying at different price levels.
- Learn about the impact on market equilibrium in both the short-run and long-run, precipitated by demand and supply shifts in competitive industries.
Verified Answer
DN
Dayang NurzawanieJul 11, 2024
Final Answer :
D
Explanation :
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.
Learning Objectives
- Learn about the impact on market equilibrium in both the short-run and long-run, precipitated by demand and supply shifts in competitive industries.