When the long-run market supply curve for a product is perfectly elastic, what is the long-term effect of a rise in demand for that product?

Show Answers

The number of firms in the industry will grow, but the product's price will remain unchanged.Both the product's price and the number of firms in the market will increase.The product's price will rise, but the number of firms will stay the same.There will be no change in either the product's price or the number of firms.The product's price will decrease while the number of firms increases.

Explanation

If the long-run supply curve is perfectly elastic, it means that the market can supply any quantity at a constant price. Therefore, when demand increases, the price does not rise; instead, more firms enter the market to meet the higher demand, increasing the total quantity supplied without affecting the price.