Suppose a competitive industry expands and higher wages must be paid to attract more workers

Economics Dec 08, 2020

Suppose a competitive industry expands and higher wages must be paid to attract more workers. What will the long-run supply curve for this industry look like?

Expert Solution

When a competitive industry expands, and a higher wage must be paid to attract more workers, both production and labor costs will increase. This will lead to increased sales from the increased production hence leading to increased profits. The long-run supply curve for this industry will slope upwards. This is because increased production cost leads to increased output.

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