11) Which of the following events does NOT occur when market demand shifts leftw

Question

11) Which of the following events does NOT occur when market demand shifts leftward in an increasing-cost industry? A) Initially, the output produced by existing firms declines along the short-run market supply curve. B) The market price declines below the minimum LAC due to the short-run supply response. C) The market supply curve shifts leftward as some firms exit the market when the market price is below the minimum LAC. D) As firms exit, the market price rises and attracts other firms to enter the market. E) The LAC curve shifts downward as output falls. Answer: D

Explanation / Answer

Answer
Option D
The shifts of demand curve decrease price and quantity which decreases the price below LAC, because of this some firm faces loss and exit the market up to the market earns zero economic profit but no firm will enter in this time.

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