Describe the graph for a long-run supply curve in a decreasing-cost industry. Why does it have this slope?
What will be an ideal response?
For the graph, quantity or output for the industry will be on the horizontal axis and price will be on the vertical axis. The slope of the graph for a long-run supply curve in a decreasing-cost industry will be down sloping. It shows that shows an increase in the level of output is associated with a decrease in the price of the product. The reason for the downward slope is that as firms increase output, they demand more resource inputs. The increased demand for resource inputs gives firms the opportunity supplying those inputs to achieve more economies of scale and thus reduce the resource prices. As the resource price falls, this decreases the minimum average total cost of the product for firms in the industry.
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