Chapter 11R, Problem 15MCQ

To determine

The correct option for given situation where long-run supply curve for perfect competition.

Answer to Problem 15MCQ

Option a is correct answer.

Explanation of Solution

Explanation for correct option:

a.

In long-run, supply curve in firms in perfect competition is flatter and more elastic than supply curve in short-run. This is due to the more easy entry and exit of the firm in the long run. It is flatter in long-run as it is not easy for existing firms to suddenly increase or decrease its production in long run due to the entrance or exit of new firms. Therefore, option a is correct.

Explanation for incorrect options:

b.

The supply curve is flatter and more elastic as compared to the short-run supply curve. This is because the entry and exist is so easy for firms that it maintains the price equals to minimum average total cost. Therefore, option b is incorrect. c.

The supply curve in short run is steeper as it is unlikely to enter or exit more firms in short-run. Thus, it cannot influence the price and the output level. Therefore, option c is incorrect.

d.

The free entry or exit of the firms in long run is more likely due to which supply curve is flatter in long run as compared to the supply curve in short-run. Therefore, option d is incorrect.

e.

the supply curve in long-run is more elastic as firms can enter more freely in long-run. This can influence the prices highly as compared to the changes in prices in short-run. Therefore, option e is incorrect.

Economics Concept Introduction

Supply curve: Supply curve refers to the line that represents the relationship between the price of the product and the quantity that can be supplied by the producer.