Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 7

D. is a critic of standard microeconomic analysis. In one of his frequent tirades, he was heard to say, ''Take the argument for upward-sloping, long-run supply curves. This is a circular argument if I ever heard one. Long-run supply curves are said to be upward sloping because input prices rise when firms hire more of them. And that occurs because the long-run supply curves for these inputs are upward sloping. Hence, the argument boils down to 'long-run supply curves are upward sloping because other supply curves are upward sloping.' What nonsense!'' Does Dr. D. have a point? How would you defend the analysis in this chapter?