The correct answer is Option (1) → (B), (A), (C), (D)
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(B) At the prevailing market price, each firm is earning a supernormal profit and will attract some new firms. This is the starting point for disequilibrium, creating an incentive for entry.
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(A) Supply curve shifts rightward, however demand remains unchanged. As new firms enter due to supernormal profits, the total market supply increases, shifting the supply curve to the right.
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(C) Market prices fall, and supernormal profits are eventually wiped out. With an increased supply and unchanged demand, the market price will decrease. This price fall reduces the profits of firms.
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(D) All firms in the market are earning normal profit, no more firms will have incentive to enter. Once supernormal profits are eliminated and firms are only earning normal profits, there is no longer an incentive for new firms to enter (or existing firms to exit), leading to a long-run equilibrium.
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