Question

The model of monopolistic competition can characterize the market for plumbing services in a city. Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services. We expect that in the short run the price__________.
A. and output of plumbing services will remain unchanged.
B. of plumbing services will rise and the output will fall.
C. and output of plumbing services will rise.
D. and output of plumbing services will fall.

Answer 1

Answer:

Correct answer is (C) The price and output of plumbing services will rise

Explanation:

In a monopolistic market if the service or commodity is initially in long-run equilibrium, and then there is an increase in demand, then, there will increase in price in a short run as people demands more and the provider of the service or the producer of the goods will tend to provide or produce more.