Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by
A)increases in production costs resulting from more firms coming into the market.
B)a breakdown of the "free entry and exit" feature of competition.
C)a breakdown of the "price taking" feature of competition.
D)a stable demand curve for the good, that is, a demand curve that never shifts.

Question

Quizplus · Accepted Answer

An upward-sloping supply curve indicates that as the price of the good increases, firms need to incur higher production costs to produce more of the good. This could occur because of factors such as scarcity of resources or diseconomies of scale. As more firms enter the market to produce the good, the competition for these resources can drive up their prices, leading to higher production costs and an upward-sloping supply curve.

Suppose the Long-Run Supply Curve for a Good Is Upward-Sloping