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Consider the following setup for a perfectly competitive market: Suppose that for the firm, TC=625+Q^2 and MC=2Q, and for the industry, demand is given by P=100-Q and supply is given by S=Q. However, suppose now that there is an increase in demand, so that demand is given by and for the industry, demand is given by P=500-Q. Will this market outcome be sustainable? That is, do you expect firms to leave the market, enter the market, or neither? a. Firms will enter the market. b. Firms will leave the market. c. Firms will neither enter nor leave the market. d. There could be barriers to entry.

Consider the following setup for a perfectly competitive market: Suppose that for the firm, TC=625+Q^2 and MC=2Q, and for the industry, demand is given by P=100-Q and supply is given by S=Q. However, suppose now that there is an increase in demand, so that demand is given by and for the industry, demand is given by P=500-Q. Will this market outcome be sustainable? That is, do you expect firms to leave the market, enter the market, or neither? a. Firms will enter the market. b. Firms will leave the market. c. Firms will neither enter nor leave the market. d. There could be barriers to entry.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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14. Consider the following setup for a perfectly competitive market: Suppose that for the firm, TC=625+Q^2 and MC=2Q, and for the industry, demand is given by P=100-Q and supply is given by S=Q. However, suppose now that there is an increase in demand, so that demand is given by and for the industry, demand is given by P=500-Q. Will this market outcome be sustainable? That is, do you expect firms to leave the market, enter the market, or neither?

a. Firms will enter the market.

b. Firms will leave the market.

c. Firms will neither enter nor leave the market.

d. There could be barriers to entry.

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