If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will:
A) be perfectly elastic.
B) be perfectly inelastic.
C) slope upward to the right.
D) be more inelastic than the short-run supply curve for the product.

Question

Quizplus · Accepted Answer

As the firms in the industry expand output in response to an increase in demand, the resources become scarce, and the resource prices rise. This increase in resource prices causes an increase in the cost of production and, thus, an increase in the marginal cost. Therefore, in the long run, the market supply curve will slope upward to the right, indicating that producers will only be willing to supply more of the product at higher prices. This means that the supply curve will be less elastic in the long run, as firms cannot easily increase their output due to rising resource prices.

If Resource Prices Rise and the Per-Unit Cost of Producing