A market supply curve is more elastic in the long run than in the short run because aproducers’ marginal costs are increasing bthe quantity demanded increases at a steady rate cthere are no fixed inputs in the long run dof constant returns to scale in production eof diseconomies of scale in production
Question
A market supply curve is more elastic in the long run than in the short run because aproducers’ marginal costs are increasing bthe quantity demanded increases at a steady rate cthere are no fixed inputs in the long run dof constant returns to scale in production eof diseconomies of scale in production
Solution
The correct answer is c) there are no fixed inputs in the long run.
Here's why:
In the short run, there are fixed inputs (like machinery or a factory building) that a firm cannot change. Therefore, if there's an increase in demand, a firm can only increase production to a certain extent before it starts to hit capacity constraints. This makes the supply curve relatively inelastic.
In the long run, however, all inputs are variable. This means that if there's an increase in demand, a firm can not only increase its use of current inputs, but it can also invest in more machinery or even build a new factory. This gives the firm a lot more flexibility to respond to changes in demand, making the supply curve more elastic.
The other options are not correct because:
a) Producers' marginal costs increasing would actually make the supply curve more inelastic, not more elastic.
b) The quantity demanded increasing at a steady rate doesn't have a direct impact on the elasticity of the supply curve.
d) Constant returns to scale in production means that doubling all inputs leads to a doubling of output. This doesn't necessarily make the supply curve more elastic in the long run.
e) Diseconomies of scale in production means that as a firm increases production, its long-run average costs start to rise. This also doesn't necessarily make the supply curve more elastic in the long run.
Similar Questions
In the long run in a competitive industry, if demand increases and the industry is a decreasing-cost industry, then the industry supply curve is
Consider a constant cost industry that is perfectly competitive and in which the demand curve is downward sloping. Further, starting from a long-run equilibrium, firms experience an improvement in technology that lowers the marginal cost and average total cost to the same extent. In the long run, we expect: [Tick all that apply]
Which statement is true? Group of answer choicesThe long-run supply curve for a competitive firm is its long-run marginal cost curve above the minimum of AVC.The long-run supply curve for a competitive firm is its long-run marginal cost curve above the minimum of ATC.The long-run supply curve for a competitive firm is its long-run marginal cost curve above the minimum of AFC.The long-run supply curve for a competitive firm is its long-run marginal cost curve.None of the above.
The short-run supply curve of a competitive firm is the portion ofGroup of answer choicesthe average variable cost curve that lies above its marginal cost curve.its marginal cost curve that lies above its average variable cost curve.its marginal cost curve that lies above its average total cost curve.its average total cost curve that lies above its marginal cost curve.
The short-run market supply curve isQuestion 1Select one:a.the horizontal summation of each firm's short-run supply curve.b.the horizontal summation of each firm's short-run average cost curve.c.the vertical summation of each firm's short-run average cost curve.d.the vertical summation of each firm's short-run supply curve.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.