Asked by Maryana Bilska on Jun 13, 2024
Verified
Refer to Figure 14-7. Suppose a firm in a competitive market, like the one depicted in graph (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.
Competitive Market
A market structure characterized by a large number of buyers and sellers, where no single entity has the power to significantly influence market prices.
Market Supply
The total amount of a product that sellers are willing and able to sell across all markets at a given price level over a specific time period.
Market Demand
The cumulative volume of a good or service that all buyers in a market are prepared and able to buy at a range of prices.
- Recognize the factors that can lead to shifts in market demand and supply.
- Interpret how changes in market conditions (demand or supply) affect prices and quantities in both short-run and long-run scenarios.
- Understand the roles of firm entry and exit in determining market equilibrium in the long run.
Verified Answer
AG
Aissa GutierrezJun 17, 2024
Final Answer :
D
Explanation :
An increase in market demand from D0 to D1 would lead to a higher equilibrium price, as depicted by the shift from P1 to P2, assuming supply remains constant.
Learning Objectives
- Recognize the factors that can lead to shifts in market demand and supply.
- Interpret how changes in market conditions (demand or supply) affect prices and quantities in both short-run and long-run scenarios.
- Understand the roles of firm entry and exit in determining market equilibrium in the long run.