When entry and exit behavior of firms in an industry does not affect a firm's cost...

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

a. the long-run market supply curve must be horizontal.

b. the long-run market supply curve must be upward-sloping.

c. the long-run market supply curve must be downward-sloping.

d. we do not have sufficient information to determine the shape of the long-run market supply curve.

Solutions

Expert Solution

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,then

a) The long-run market supply curve must be horizontal

The slope of the long-run supply curve depends on what happens to input prices as the industry expands or contracts. The entry and exit of firms do not affect input prices, so the industry Longrun Supply curve is horizontal, or perfectly elastic. Input prices are constant because the input supply curves facing the firm are assumed to be horizontal, or perfectly elastic. New firms can enter the industry and produce at the same AC as the existing firms. Thus, the industry can produce more output at a constant cost.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Describe how easy entry and exit of firms into an industry impacts the long run equilibrium....

Describe how easy entry and exit of firms into an industry impacts the long run equilibrium. (10)

1. The taxi industry in the city has become very competitive. Entry and exit are currently...

1. The taxi industry in the city has become very competitive. Entry and exit are currently easy. Anyone can enter the market without a license or certificate and use their own cars. The major taxi company has complained that it is hard to make any profits and wants the city to institute a program that requires taxi drivers to purchase a medallion per car before it can operate. Moreover, the taxi company has incurred significant costs to build its fleet...

How does each advantage in Dunning's eclectic theory specifically affect a firm's decision regarding entry mode?

How does environment affect a child's bullying behavior? Does learned behavior play a role?

A monopolistically competitive industry does not display ________ in either the short-run, when firms are making...

A monopolistically competitive industry does not display ________ in either the short-run, when firms are making economic profits and losses, nor in the long-run, when firms are earning ________. allocative efficiency; positive economic profits allocative efficiency; zero economic profits productive efficiency; negative economic profits

•How does culture and gender affect nonverbal behavior? •

In spite of the fact that firms do not make payments on resources they own, these resources still have and opportunity cost. How is this possible, and how does this affect a firm's efforts to maximize profits?

To participate in the discussion forum, you are expected to:1) Apply theories from your economics textbook relevant to this question.2) Provide examples to justify the rationale behind your discussion.3) Write a minimum of three paragraphs containing a minimum of three sentences each (one paragraph for Part 1 and two paragraphs for Part 2). This is approximately the minimum amount you will need to be able to fulfill the expectations for the discussion. However, it is unlikely that such a response...

Consider a market with many firms that have different cost structures. Unless shutdown or exit is...

Consider a market with many firms that have different cost structures. Unless shutdown or exit is optimal, every firm expands production until ___________. A. marginal product is maximized. B. marginal revenue, marginal cost, and price are all equal (MR = MC = P). C. marginal revenue is equal to the minimum of short-run average total cost. D. marginal cost is minimized. To construct the supply curve in a market with many firms with different cost structures, the ___________. A....

how does attitude and social norm affect consumer behavior?

Explain the factors that affect the firm's total cost, and explain the behaviour of a typical...

Explain the factors that affect the firm's total cost, and explain the behaviour of a typical firms costs in the short run and long run. In addition, what determines the behaviour of a typical firm's costs in the short run and long run.

Subjects