FIGURE 7-8 Comparing the Short-Run and Long-Run Industry Supply Curves
imageThe long-run industry supply curve may slope upward, but it is always flatter—more elastic—than the short-run industry supply curve. This is because of entry and exit: a higher price attracts new entrants in the long run, resulting in a rise in industry output and a fall in price; a lower price induces existing producers to exit in the long run, generating a fall in industry output and an eventual rise in price.