An industry has 200 firms, each with the production function f ( x 1, x 2) = x 1 1/2 x 2 1/2 . The price of factor 1 is \$1 and the price of factor 2...
Question

# An industry has 200 firms, each with the production function fxxx1x2

(1, 2) = 1/21/2. The price of factor 1 is \$1 and the price of factor 2 is \$1. In the long run, both factors are variable, but in the short run, each firm is stuck with using 10 units of factor 2. The long- run industry supply curve is

a. upward sloping with zero supply if price is less than \$10.

b. horizontal with zero supply for prices less than \$2 and infinite supply for prices greater than \$2.

c. horizontal with zero supply for prices less than \$5 and infinite supply for prices greater than \$5.

d. downward sloping for outputs less than 10.

e. None of the above

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