Assume the short-run average total cost for a perfectly competitive industry remains constant as the output of the industry expands. In the long run, the industry supply curve will:
A) have a positive slope.
B) have a negative slope.
C) be perfectly horizontal.
D) be perfectly vertical.

Question

Quizplus · Accepted Answer

In the long run, firms are able to adjust all factors of production, including the size of their plants, leading to a situation where the industry supply curve is perfectly elastic or horizontal. This means that as demand increases or decreases, the industry can easily adjust its output without affecting the price. Since the short-run average total cost is constant as output expands, there are no economies or diseconomies of scale, and firms can enter or exit the market without affecting the price. As a result, the industry supply curve is perfectly elastic in the long run.

Assume the Short-Run Average Total Cost for a Perfectly Competitive