Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:PRICE
P₁
Graph (a)
Q₂ Q₂
QUANTITY
MC
Figure 14-7
ATC
PRICE
P₁
P₁
Graph (b)
W
QQ, Q, Q₂
QUANTITY
D₁
Transcribed Image Text:Refer to Figure 14-7. Assume that the market starts in quilibrium at point W in graph (b). An increase in demand from Do to
D₁ will result in
a. rising prices and falling profits for existing firms in the market.
b. a new market equilibrium at point X.
c. an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.
d. falling prices and falling profits for existing firms in the market.
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