A supply curve only relates to a perfectly competitive industry
The industry short run supply curve is derived by adding together each
individual firms supply curve
The firms individual supply curve is given by its MC curve
An MC curve is the traditional umbrella shape because of increasing then
decreasing marginal returns from adding extra units of labour to a fixed
amount of capital.
In perfect competition the long run supply curve is horizontal
Or so I have always believed
Regards
Richard Young
Business Studies, Economics & ICT Teacher
Wood Green School
Woodstock Road
Witney OX28 1DX
Tel 01993 702355
Fax 01993 708662
www.woodgreen.oxon.sch.uk
BECTa/Guardian Secondary School Web Site of the Year 2001
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-----Original Message-----
From: For teachers and lecturers interested in curriculum issues
affecting the te [mailto:[log in to unmask]] On Behalf
Of Chris Rodda
Sent: 19 December 2001 09:02
To: [log in to unmask]
Subject: Law of increasing costs v. Economies of scale
For years I have been unconvinced about some textbook explanations of
increasing costs as a reason for supply curves sloping upwards, which
contradicts Economies of Scale and actual experience of declining costs.
There must, I presume be a clever argument, reconciling them (similar to
Hick's or the demand curve) - can somebody point me to a text.
Chris Rodda
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