Question

we learned that the​ long-run supply curve is perfectly​ elastic, or horizontal. We also​ learned, however, that in the short​ run, when the demand for a product​ increases, individual firms increase their production​ (or, quantity​ supplied) in response to a higher market price. What occurs in the transition from the​so-called "short​ run" to the​ "long run" that leads the​ long-run supply curve to be perfectly​ elastic?

Answer 1

A perfectly elastic curve is horizontal . It shows that quantity supplied is infinite at any price . Entry and exit of firms throughout the process causes enough supply in the long run to satisfy any level of demand . In short run supply is limited due to resource constraint but in long run supply is expandable and constant cost is achieved . Firms enter or exit the market based on short run conditions , thus in long run optimum supply is reached at identical constant cost for each firm . The long run supply curve is horizontal specially in constant cost industry . What ever will the output be supplied , price will remain the same . Price = minimum average cost in long run .