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 (a horizontal line).
B) be perfectly inelastic (a vertical line).
C) slope upward to the right.
D) be more inelastic than the short-run supply curve for the product.

Question

Quizplus · Accepted Answer

As resource prices rise, it becomes more expensive for firms to produce the product. This means that the cost of production for each unit of output will increase. As firms in the industry expand output in response to an increase in demand, the per-unit cost of production will continue to increase due to the higher prices of resources. This will cause the long-run market supply curve to slope upward to the right, indicating that as demand increases, the price of the product will also increase to cover the higher costs of production. A horizontal line (perfectly elastic) would indicate that firms can increase output without any increase in cost, which is unlikely in the real world. A vertical line (perfectly inelastic) would indicate that the quantity supplied does not change at all in response to changes in price, which is also unlikely. The long-run supply curve will be more elastic than the short-run supply curve because in the long run, firms have more flexibility to adjust their production processes and find ways to produce more efficiently, thereby reducing their per-unit cost of production.

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