Asked by Alexis WATKINS on May 11, 2024
Verified
Which of the following statements is correct?
A) The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.
B) The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.
C) The long-run supply curve for a purely competitive industry will be less elastic than the industry's short-run supply curve.
D) The long-run supply curve for a purely competitive decreasing-cost industry will be upsloping.
Increasing-Cost Industry
An industry where the costs of production increase as output increases, often due to factors like resource depletion or higher input prices.
Long-Run Supply Curve
A curve showing the relationship between the price of a good and the quantity supplied over a period long enough for firms to enter or exit the market.
Perfectly Elastic
Refers to a situation in economic theory where a small change in price leads to an infinite quantity demanded or supplied.
- Ascertain the characteristics and outcomes of constant-cost, increasing-cost, and decreasing-cost industries.
Verified Answer
KG
Kenia GarciaMay 18, 2024
Final Answer :
A
Explanation :
In a purely competitive increasing-cost industry, as the demand for the product increases, the price will rise, causing existing firms to expand production and new firms to enter the market. This will drive up the price of the resources used in production, resulting in higher costs for each additional unit of output. Thus, the long-run supply curve for this industry will be upsloping.
Learning Objectives
- Ascertain the characteristics and outcomes of constant-cost, increasing-cost, and decreasing-cost industries.