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Business, 03.12.2019 01:10 mikeydog5291

Ardenia is a small, open economy. its market for breakfast cereals can be considered competitive, with many producers and limited product differentiation. at the current market price of $10, a representative firm supplies 1,000 twenty-ounce packs of cereals per month. tis allows the firm to earn $1,500 in economic profits. when the demand for cereals increased and the price went up to $10.5 per twenty-ounce pack, an industry analyst claimed that this would ensure a higher market share for each existing producer. this conclusion is flawed because . consumer surplus falls when price rises. b. new firms are likely to enter the market and compete away the profits. c. some consumers will exit the market because of the higher price. d. the analyst is ignoring the fact that marginal cost increases when firms increase quantity supplied. e. the analyst is assuming that the demand for breakfast cereals is elastic .

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