Assume the short-run average total cost for a perfectly competitive industry increases as the output of the industry expands

Economics Dec 08, 2020

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

a. Be perfectly vertical,

b. Be perfectly horizontal,

c. Has a positive slope,

d. Have a negative slope.

Expert Solution

The answer is c).

In the long run, firms produce at the efficient scale where price is equal to average total cost. Since average total cost increases with production, so will price. Hence, the long run supply curve will have a positive slope.

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