Question

The smartphone market is in long-run equilibrium. Then the demand for smartphones increases.

Describe what happens in the market for smartphones.

In the short-run firms will ___

A. make an economic profit

B. incur and economic loss

C. continue to break even

Some firms will ___ the market, and the market supply curve will shift __.

A. exit; rightward

B. enter; leftward

C. enter; rightward

D. exit; leftward

Answer 1

a) "A" as the demand in the market increases the price will increase and that will lead to a higher economic profit for the existing firms.

b) "C"

Some firms will enter the market and that will shift the supply curve to the right.