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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

The ability of firms to enter and exit a market over time means that, in the long run,

a. the demand curve is more elastic.

b. the demand curve is less elastic.

c. the supply curve is more elastic.

d. the supply curve is less elastic.

To determine
The elasticity and market entry and exist.

Explanation

Option (c):

Over longer periods, firms can expand their production by building new factories, expanding the existing factories or reduce production by closing the old factories. That in the long run they can enter or exit a market. So, in the long run, the quantity supplied responds significantly to a change in price. This implies in the long run, and the supply is more elastic which enables firms for the entry and exit of the market. So option ‘c’ is correct.

Option (a):

Even though, goods tend to have more elastic demand over longer time horizons...

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