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Question
Microeconomics
Posted 9 months ago
Macarons are produced in a perfectly competitive market. The long-run supply curve for macarons is horizontal.
Based on this information, which of the following is true for this industry?
Choose 1 answer:
(A) An increase in demand in this market increases prices in the longrun.
(B) The marginal cost curve for a firm in this industry decreases as more firms enter.
(c) When more firms enter this market, each firm's average total cost curve increases.
(D) When more firms enter this market, input prices don't change.
(E) When more firms enter this market, input prices increase.
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Answer from Sia
Posted 9 months ago
Solution
a
Perfect Competition: In a perfectly competitive market, firms are price takers, meaning they cannot influence the market price
b
Long-Run Supply Curve: A horizontal long-run supply curve indicates that the industry is a constant-cost industry, where input prices do not change as industry output changes
c
Input Prices: Since the long-run supply curve is horizontal, input prices remain constant regardless of the number of firms in the market
Answer
(D) When more firms enter this market, input prices don't change.
Key Concept
Constant-Cost Industry
Explanation
In a constant-cost industry, the long-run supply curve is horizontal, indicating that input prices remain unchanged as the number of firms in the market changes.
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