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An Industry Has 1,000 Firms, Each with the Production Function

Question 40

Multiple Choice

An industry has 1,000 firms, each with the production function f(x1, x2) =x1/21x1/22.The price of factor 1 is $1 and the price of factor 2 is $1.In the long run, both factors are variable, but in the short run, each firm is stuck with using 100 units of factor 2.The long-run industry supply curve is


A) upward sloping with zero supply if price is less than $10.
B) downward sloping for outputs less than 10.
C) horizontal with zero supply for prices less than $2 and infinite supply for prices greater than $2.
D) horizontal with zero supply for prices less than $10 and infinite supply for prices greater than $10.
E) upward sloping with zero supply if price is less than $20.

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