Figure 6.5 -Figure 6.5 Shows the Short-Run and Long-Run Effects of an of an Increase

question 216

Multiple Choice

Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. Suppose that the market demand curve shifts to the right. Why is the short-run supply curve steeper than the long-run supply curve?

• A) because production facilities are fixed in the short run
• B) because each firm experiences diminishing returns in the short run
• C) because production becomes costlier as firms squeeze more output from the existing production facilities
• D) all of the above

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