Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, which of the following statements is true in the long run?
A. The market price drops below $12 as more firms enter the market and build more plants.
B. Both existing firms and new firms earn a zero economic profit.
C. All firms in the industry maximize their profits by producing the output where the marginal cost equals $10.
D. All of these are correct.
Answer: D
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