In a perfectly competitive industry - assuming the short-run average total cost increases as the output of the industry expands - the industry supply curve, in the long run, will:

Question

Quizplus · Accepted Answer

In the short run, the average total cost (ATC) increases as output expands due to the law of diminishing marginal returns. Therefore, in the short run, the industry supply curve slopes upward. However, in the long run, firms can enter or exit the industry, and new firms can adopt more efficient production methods, which will shift the individual firm's cost curves downward. As a result, the industry supply curve will slope upward with an increase in price, indicating that more firms will enter the industry. Therefore, the correct answer is D, the industry supply curve will have a positive slope in the long run.

In a Perfectly Competitive Industry - Assuming the Short-Run Average