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Posts: 195
4 weeks ago
Firms in the long run do not experience diminishing marginal returns. Then why do some industries have upward-sloping long-run supply curves?
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Microeconomics: Principles, Applications, and Tools
Edition: 8th
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4 weeks ago
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In the long run, firms can flexibly scale up or down their production facilities so do not experience diminishing marginal returns. However, as an increased number of firms in an industry expands their production facilities, the prices of some inputs may rise quickly as their quantities are limited. Also, some industries face inputs with varying degrees of quality or productivity. At low prices only low cost producers are able to produce; as price rises firms facing higher costs are able to start production.
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