A firm sells 10,000 units of X per month at the market price of $10. There are many other firms in this industry producing the same variety of X. With all firms producing an identical product, each firm is a price taker in this market. Farah Mahmood and her friend Daniela Rodriguez, both students of economics, are debating the impact of a recent increase in the demand for X. Farah feels that the demand faced by each firm will shift to the right. This in turn will increase the market price. Daniela meanwhile is not sure how much the price will rise because she thinks that the immediate response to the higher demand will be a rightward shift in each firm's supply curve.
Farah's claim that each firm's demand curve will shift right is flawed because:.
A. she is ignoring the impact of the increased demand on producer surplus.
B. she is confusing the demand curve faced by the firm with the market demand curve.
C. she is assuming that the market demand curve is not linear.
D. she is assuming that the law of supply does not hold for X.
E. she is confusing supply and quantity supplied