Which of the following is true about constant cost industries?
Choose 1 answer:
(A) The long-run supply curve is downward sloping.
(B) The prices of inputs used to produce a good decrease when more firms enter the industry.
(C) The supply curve for inputs used to produce this good is at least somewhat inelastic.

D The prices of inputs used to produce a good don't change when more firms enter the industry.
(E) The long-run supply curve is upward sloping.

Question

Which of the following is true about constant cost industries?
Choose 1 answer:
(A) The long-run supply curve is downward sloping.
(B) The prices of inputs used to produce a good decrease when more firms enter the industry.
(C) The supply curve for inputs used to produce this good is at least somewhat inelastic.

D The prices of inputs used to produce a good don't change when more firms enter the industry.
(E) The long-run supply curve is upward sloping.

Accepted Answer

∻Solution∻ ‖ a ⋮ Constant Cost Industry: In a constant cost industry, the entry or exit of firms does not affect the prices of inputs because the supply of inputs is perfectly elastic. ‖ ‖ b ⋮ Long-Run Supply Curve: For a constant cost industry, the long-run supply curve is perfectly elastic, meaning it is horizontal at the market price. ‖ ∻Answer∻ ⚹ (D) The prices of inputs used to produce a good don't change when more firms enter the industry. ⚹ ∻Key Concept∻ ⚹ Constant Cost Industry ⚹ ∻Explanation∻ ⚹ In a constant cost industry, the prices of inputs remain unchanged regardless of the number of firms in the industry, leading to a horizontal long-run supply curve.◊How does the entry of more firms into a constant cost industry affect the prices of inputs used to produce a good?⍭ Generate me a similar question◊⚹

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