One Reason Why the Long-Run Supply Curve May Slope Upward

question 124

Multiple Choice

One reason why the long-run supply curve may slope upward in a competitive market is that

• A) firms can exit the industry easily.
• B) firms can enter the industry easily.
• C) there are many buyers and many sellers.
• D) some resources necessary to produce the product may be available only in limited supplies.
• E) some resources necessary to produce the product are not limited.

---

Definitions:

Capital Constraints

Limitations on the amount of capital a company or economy can obtain, often leading to restrictions on growth and investment.

NPV Analysis

Net Present Value Analysis, a method of evaluating the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds, encompassing debt and equity.

Internal Rate

Often referred to as Internal Rate of Return (IRR), it is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.