Recall the application about the short-run and long-run elasticity of supply of milk.If the price of milk increases by 20%,in the short run the quantity of milk supplied will increase by only 2% and in the long run it will increase by 50 %.Why is supply more price-elastic in the long run?
A)Dairy farmers can expand existing facilities and build new ones,so farmers are more less responsive to a higher price.
B)Dairy farmers can expand existing facilities and build new ones,so farmers are more responsive to a higher price.
C)Dairy farmers can squeeze just a little more output from their existing production facilities.
D)none of the above

Question

Quizplus · Accepted Answer

In the long run, dairy farmers have the ability to expand their existing facilities and build new ones, which allows for more flexibility in their production process. With more options available to them, they are able to respond more readily to changes in the price of milk. Therefore, supply is more price-elastic in the long run.

Recall the Application About the Short-Run and Long-Run Elasticity of Supply