The long-run supply curve under pure competition will be
A) downward-sloping in a decreasing-cost industry and upward-sloping in an increasing-cost industry.
B) horizontal in a constant-cost industry and downward-sloping in an increasing-cost industry.
C) vertical in a constant-cost industry and upward-sloping in a decreasing-cost industry.
D) upward-sloping in an increasing-cost industry and vertical in a constant-cost industry.

Question

Quizplus · Accepted Answer

In the long run, firms can enter or exit the industry, so the supply curve will shift until the industry is in long-run equilibrium. In a decreasing-cost industry, the long-run supply curve will be downward-sloping because as the industry expands, the average cost of production will decrease, and firms will be willing to supply more output at a lower price. In an increasing-cost industry, the long-run supply curve will be upward-sloping because as the industry expands, the average cost of production will increase, and firms will be willing to supply less output at a higher price.

The Long-Run Supply Curve Under Pure Competition Will Be