In most cases the supply curve for a perfectly competitive industry can be described as which of the following?

Question

BlackTom AI · Accepted Answer

To begin, consider how supply responds to price changes in different time horizons. 
Option 1: Perfectly inelastic in the long run. This would imply that quantity supplied does not change at all with price over the long run, which contradicts the typical behavior in a competitive market where firms can adjust production, enter or exit, and acquire new capacity. Hence this is not correct. 
Option 2: More elastic in the short run than in the long run. The opposite is generally true; producers have less time to react in the short run, so supply tends to be less elastic there and more elastic in the long run as firms adjust capacities, technology, and input choices. This makes this option incorrect. 
Option 3: Perfectly elastic in the short run. A perfectly elastic supply would mean any price increase leads to an infinite quantity supplied, which is not a realistic depiction of short-run behavior for most industries. In the short run, capacity constraints and fixed inputs prevent unlimited responsiveness, so this is not accurate. 
Option 4: Downward sloping in the short run. In standard microeconomics, the supply curve is generally upward sloping or at least non-decreasing because higher prices incentivize higher production; a downward-sloping supply curve would imply that higher prices reduce quantity supplied, which contradicts basic supply theory. This option is incorrect. 
Option 5: More elastic in the long run than in the short run. This aligns with the core idea that given enough time, firms can adjust plant size, adopt new technology, enter or exit, and reallocate resources, making quantity supplied more responsive to price changes over the long run. Therefore this is the correct interpretation.

In most cases the supply curve for a perfectly competitive industry can be described as which of the following?Single choice

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Figure 5-6Refer to Figure 5-6. Along which of these segments of the supply curve is supply least elastic?

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