If a dairy farm in a perfectly competitive market experiences a sudden increase in demand for milk, what is the most likely immediate effect on the market price and individual firm's output?

When there is a sudden increase in demand for milk in a perfectly competitive market, the market price of milk is likely to rise. This happens because more people want to buy milk, but the supply hasn't changed yet, so sellers can charge more. As the price increases, individual dairy farms will respond by producing more milk to take advantage of the higher prices. For example, if a farm was producing 100 gallons of milk a day at $2 per gallon, an increase in demand might raise the price to $3 per gallon, encouraging the farm to increase its output to 120 gallons to maximize profits. Overall, the immediate effect is higher prices and increased production by individual farms.