CFA Practice Question

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CFA Practice Question

As compared to the short-run supply curve, what should the long-run supply curve look like?
A. steeper
B. flatter
C. It depends on the cost structure of the industry.
Explanation: The supply curve is more elastic (flatter) in the long run, because in the long run, all costs are variable, so firms can modify their production facilities or enter/leave the market.

User Contributed Comments 4

User Comment
GeorgeL flexibility <=> elasticity
jpducros more elasticity in the supply curve = flatter? wrong. it's the opposite.
leftcoast jpducros - the answer is correct. Flatter means a larger % change in quantity supplied for every % change in price, which means supply is elastic. A steep curve would mean quantity supplied would change very little if price changed by a large %, which would mean supply is very inelastic.

90% of the questions on here have someone claiming the answer is incorrect. I've only seen one that has been legitimately incorrect.
xemex131 flat should mean horizontal, steep should mean vertical, answer should be B
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