Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry with increasing cost. 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, what will happen to an individual firm's profit?
A. Each firm earns a positive profit at point B.
B. Each firm earns a zero profit at point B because the market is perfectly competitive.
C. The profit of each firm decreases as more firms enter the market and share the benefits of an increase in demand pushing the market from point A to point B.
D. None of these
Answer: A
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