When a competitive market experiences an increase in demand that induces an increase in producer costs, which of the following is most likely to arise: a

Marketing Dec 22, 2020

When a competitive market experiences an increase in demand that induces an increase in producer costs, which of the following is most likely to arise:

a. The long-run market supply curve will be upward sloping,

b. The condition of free entry into the market will be violated,

c. Producer profits must fall in the long run,

d. All of the above are likely to arise.

Expert Solution

The correct answer is a. The long-run market supply curve will be upward sloping.

The increase in producer costs means that, in the long-run, suppliers will want to produce a higher quantity only as the price level increases. This depicts an upward sloping curve.

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