Question

13. Marshall suggested that the cause of a downward-sloping long-run supply curve is

a. the absence of fixed cost in the long run.

b. the increased number of firms in the industry.

c. reduced input prices.

d. reduced output prices

Answer 1

b. the increased number of firms in the industry.

(Long run downward sloping supply curve implies that as output increases, new firms enter in the industry which leads to decline in cost of production. Thus, we get a downward sloping supply curve due to decrease in production cost which is because of increased number of firms in the industry. So, Marshall suggested that the cause of a downward-sloping long-run supply curve is the increased number of firms in the industry.