Practicing Success
With free entry and exit of firms in a perfectly competitive market and market in equilibrium, the sudden shift in demand curve will lead to which of the following? |
Change in price, change in quantity No change in price, change in quantity No change in price, no change In quantity Change in price, no change in quantity
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No change in price, change in quantity |
Free entry and exit of the firms would imply that under all circumstances equilibrium price will be equal to the minimum average cost of the existing firms. Under this condition, even if the market demand curve shifts in either direction, at the new equilibrium, the market will supply higher quantity at the same price.. So, there is no change in price but a change in quantity. |