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In a perfectly competitive market, if market demand increases as a result of advertising, the price...

In a perfectly competitive market, if market demand increases as a result of advertising, the price will .... in the shortrun and each firm will produce a ... quantity.       

increase, increase

increase, decrease

decrease, decrease

stay the same, stay the same  WRONG DO NOT CHOOSE
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Answer #1

In a perfectly competitive market, if market demand increases as a result of advertising, the price will increase in the short run. This is because in the short run the supply response is very slow because of the fixed inputs and small amount of time available for adjustment of output. Due to increased demand and low supply response, the market price increases. Increase in the market price induces the firms to increase the production. Hence, each Firm will produce a Increase Quantity.

Hence, in a perfectly competitive market, if market demand increases as a result of advertising, the price will increase in the short run and each firm will produce a increase quantity.

Therefore, first option is correct i.e, increase, increase.

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