Practice mode Costs , Supply And Perfect Competition

If the long-run market supply curve for a good is perfectly elastic, what will a rise in demand cause in the long run?

Correct answer B. An increase in the number of firms in the market but no increase in the price of the good

Explanation

Short-run profits attract entrants until price returns to minimum average total cost. With horizontal long-run supply, extra demand is met entirely by more firms at the same price.

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If the long-run market supply curve for a good is perfectly elastic, what will a rise in demand cause in the long run?

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If the long-run market supply curve for a good is perfectly elastic, what will a rise in demand cause in the long run?

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