A Perfectly Competitive Market Is Initially in Long-Run Competitive Equilibrium

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. As a result, existing firms in the market begin to __________. By the time all adjustments have been made, profits will __________.

A) earn positive economic profit, rise even higher
B) earn positive economic profit; be back at zero
C) produce more output; be less than zero
D) produce less output; rise
E) earn positive economic profit; turn into losses

Correct Answer:

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