Refer to the above graphs. Suppose that the market starts at its long-run compet
ID: 1115017 • Letter: R
Question
Refer to the above graphs. Suppose that the market starts at its long-run competitive equilibrium (P1, Q1), and that demand increases from D1 to D2. As a consequence, the typical profit-maximizing firm will
a.
increase quantity produced by (q2 - q1).
b.
decrease quantity produced by (q2 - q1).
c.
decrease quantity produced by (q1 - q3).
d.
not change its output level because the demand curve it is facing did not change.
a.
increase quantity produced by (q2 - q1).
b.
decrease quantity produced by (q2 - q1).
c.
decrease quantity produced by (q1 - q3).
d.
not change its output level because the demand curve it is facing did not change.
Market Single Firm Price and Cost Price SRATC HC RATC Quantity QualityExplanation / Answer
Answer
Option a
The perfectly competitive firm is price taker and it found the market demand and supply curve
and the firm produces at P=MC
so the firm will increase quantity from q1 to q2