Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by
A)decreases 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)the fact that a resource used in the production of the good is available only in limited quantities.

Question

Quizplus · Accepted Answer

An upward-sloping long-run supply curve implies that the production of the good requires a limited resource which cannot be easily or quickly increased, even with the entry of new firms or changes in production technology. As demand for the good increases, the price must rise to incentivize firms to maintain production despite the limited availability of the resource.

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