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.
From Chapter 8:
Now Playing
Perfect Competition
261 Views
Perfect Competition
215 Views
Perfect Competition
249 Views
Perfect Competition
149 Views
Perfect Competition
185 Views
Perfect Competition
184 Views
Perfect Competition
135 Views
Perfect Competition
144 Views
Perfect Competition
376 Views
Perfect Competition
159 Views
Perfect Competition
91 Views
Perfect Competition
357 Views
Copyright © 2025 MyJoVE Corporation. All rights reserved