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# Suppose that as the output of mobile phones increases, the cost of touch screens and other component

 ▲ 0 ▼ ♥ 0 Suppose that as the output of mobile phones increases, the cost of touch screens and other component parts decreases. If the mobile phone industry is purely competitive, we would expect the long-run supply curve for mobile phones to be: LO11.3 a. upward sloping. b. downward sloping. c. horizontal. d. U-shaped.
Answer and explanations Here is the full solution including the answer and explanation.

Explanation
b is correct
The price of the inputs of Product M decreases, as the output of the product increases. This is a production with decreasing cost. The lower input cost will decrease the minimum average total cost of the firm. In long run, the minimum average total cost of the firm is equal to the price. Consequently, the price will also fall. An increase in output decreases the price. As the output and price have an inverse relation, the supply curve of the firm will be downward sloping.

a is incorrect
A purely competitive firm produces Product M. The output of the product increases as the price of the components of Product M decreases. This reflects the decreasing cost of production. Lower input price will decrease the selling price. Consequently, as the output increases the selling price decreases. The supply curve is downward sloping. In the case of the upward rising supply curve, the price of the product increases as the output increases.

c is incorrect
A decreasing input price of Product M decreases the minimum average total cost. The lower minimum average total cost decreases the price as well. Consequently, the rising output will reduce the price. The supply curve will be downward sloping. The supply is elastic for the horizontal supply curve and a small change in price changes the supply massively.

d is incorrect
The price of Product M decreases, as the output of the product increases. This inverse relation of output and price makes the supply curve downward sloping. The U-shaped supply curve has three stages; the price increases as output increases, supply becomes elastic, and the price decreases as output increases for some respective units.