When will an industry's long-run supply curve be horizontal at firms' break-even price?
A) When expansion of the industry allows new input markets to develop.
B) When some firms are more efficient than others.
C) When specialized skills play a significant role in production.
D) When firms are identical and there is no factor-price effect.

Question

Quizplus · Accepted Answer

When firms are identical and there is no factor-price effect, they all have the same cost structure and any change in price will have no effect on their supply. Therefore, the long-run supply curve will be horizontal at the break-even price, as all firms will be willing to supply the market output at that price.

When Will an Industry's Long-Run Supply Curve Be Horizontal at Firms