If input prices for a perfectly competitive firm increase as the output of the industry expands in the long run, the long-run industry supply curve will:
A) have a constant slope.
B) have a negative slope.
C) be perfectly horizontal.
D) have a positive slope.

Question

Quizplus · Accepted Answer

As input prices increase, firms will be less incentivized to enter the industry, causing the industry supply curve to have a positive slope in the long run. This is because as the output of the industry expands, there is a greater demand for inputs, driving up their prices. Firms will only enter the industry if they can make a profit, which becomes harder to do as input prices increase. Therefore, the industry supply curve will shift upward as input prices increase, resulting in a positive slope.

If Input Prices for a Perfectly Competitive Firm Increase as the Output