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Explain why the "industry supply curve" is a horizontal line?

Also, why the industry supply curve is not the long run industry marginal cost curve?

3 Answers

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  • ?
    Lv 5
    1 decade ago
    Favorite Answer

    In the Classical economics, perfect employment is a premise in the labor market.

    Because the number of workers employing in perfect employment is constant,the volume of production is maintained the same.

    (Volume of production corresponding to the perfect employment)

    In other words the total supply curve becomes perpendicular

    because AS is constant at a perfect employment national income standard

    The price level of the substance becomes the same price level in the long term.

  • Anonymous
    5 years ago

    The definition of a perfectly competitive market is one in which no firm has any market power. Market power means the ability to influence the market price of the good. If no firm has the ability to influence the price of the good, that means the demand curve facing each individual firm must be perfectly elastic (horizontal). Note that this doesn't mean that the market demand curve is horizontal; the market demand curve is still downward sloping. Consider this example: You're a bottled water manufacturer competing against 9 other bottled water manufacturers. You each sell identical water: same sizes, same bottles, no vitamin-enhanced water, no flavors, etc. In other words, your industry is perfectly competitive. If all manufacturers sell at $1.00 per bottle, and you raise your price at all, even to $1.01 per bottle, there's no reason anyone would ever buy from you. You would lose all of your business to another firm. Therefore, the demand curve facing you is perfectly elastic. However, if plastic becomes much cheaper (one of the inputs to the bottles in bottled water), everyone's supply curves will shift to the right, and the market price will decrease. You won't be able to charge anything different than the new market price, but the market price can still move.

  • 1 decade ago

    in a chart everything goes horizontal?

    normally the horizontal "x" axis is the time axis

    so if nothing happens what so ever, the line is completely flat over time, horizontally

    if everything happens in this amount of time, the line would still move horizontally but also go way higher on the y axis as well

    either your question is dumb or im not getting the question

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