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8.12 : Long-run Supply Curve in Increasing and Decreasing Cost Industries

The long-run supply curve in perfect competition behaves differently in increasing-cost and decreasing-cost industries. It's important to note that this curve is not always a horizontal line.

In an increasing-cost industry, the costs of production materials and resources increase as more companies start producing the same product. This happens because the demand for these input resources increases as the industry grows, making them more expensive. As a result, the long-run supply curve slopes upward. Higher production costs mean that the price of the product will also increase as more of it is supplied to the market.

Conversely, the opposite happens in a decreasing-cost industry. As the industry expands, the costs of production resources decline. This can be due to advancements in technology or an increase in resource availability, which then lowers production costs. As a result, the long-run supply curve slopes downward, and the price of the product decreases as more is supplied.

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