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A decreasing-cost industry is characterized by: A
A decreasing-cost industry is characterized by:
A. an upward-sloping long-run supply curve.
B. a downward-sloping long-run supply curve.
C. a perfectly elastic long-run supply curve.
D. perfectly elastic short-run and long-run supply curves.
E. a perfectly elastic short-run supply curve and an upward-sloping long-run supply curve.
Expert Solution
Option (B) a downward- sloping long run supply curve is correct
This option is correct because in the long run, the production increases with the decrease in the cost of production. It means the quantity supplied increases with the decrease in the price. It shows the quantity supplied and prices are inversely related. So, the supply curve in long run will be downward sloping.
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