An industry that has increasing returns to scale and fixed factor prices will have a long-run supply curve that is
A) vertical.
B) horizontal.
C) upward-sloping.
D) downward-sloping.

Question

Quizplus · Accepted Answer

In an industry with increasing returns to scale, as production increases, the average cost of production decreases. This leads to a downward-sloping long-run supply curve because firms can produce more at a lower cost, encouraging them to supply more at lower prices.

An Industry That Has Increasing Returns to Scale and Fixed