Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. Suppose that the market demand curve shifts to the right. Why is the short-run supply curve steeper than the long-run supply curve?

Question

Quizplus · Accepted Answer

The short-run supply curve is steeper than the long-run supply curve due to a combination of factors: production facilities are fixed in the short run, each firm experiences diminishing returns as they try to increase output, and production becomes costlier as firms attempt to squeeze more output from existing facilities. These factors contribute to the steepness of the short-run supply curve compared to the long-run supply curve, where firms can adjust all inputs and potentially enter or exit the market.

Figure 6.5 -Figure 6.5 Shows the Short-Run and Long-Run Effects of an of an Increase