If the demand for coffee increases, what happens to the equilibrium price and quantity, and how does the market adjust back to long run equilibrium?

• A. Price increases and quantity decreases; firms exit, reducing supply.
• B. Price and quantity increase; new firms enter, increasing supply until price returns to original level.
• C. Price decreases and quantity increases; firms exit, reducing supply.
• D. Price and quantity decrease; firms enter, increasing supply.

Answer: (B)