Long-Run Adjustment with Economies of Scale
Assume a perfectly competitive market experiences an increase in demand. If the firms in this market are operating under economies of scale, what is the expected outcome in the long run?
A
Existing firms will maintain their current production levels as consumer surplus increases.
B
The market will transition into a monopoly as one firm dominates due to increased demand.
C
Firms will experience continued economic profits as they increase prices with demand.
D
New firms will enter the market, increasing supply until economic profits reach zero.
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