Question

The Long-Run Supply curve of a perfectly competitive industry cannot be downward sloping.

Homework Answers

Answer #1

This is False.

The long run aggregate supply curve of a perfectly competitive firm is different from its short run supply curve. This is because there is entry and exit of the firm in the long run.

The LRAS curve of a perfectly competitive industry can be downward when its experience economies of scale in the long run, for a decreasing cost industry. As the industry increases production, the cost keeps on decreasing and eventually LRAS is downward.

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