Why long run supply curve can be downward sloping

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Q. 1. If prices of A, B and C are $2. $3 and $1 respectively and consumer has $26 to spend on se three products, what combination of three products should be purchased in order to maximize utility? Please show how you get answer.
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2. Can you explain and illustrate with graphs (2 of m), relationship between MC curve and supply curve of a perfectly competitive industry.

3. Long run supply curve will tend to reflect behaviour of production costs as an industry expands when more firms enter industry. An increasing cost industry has an upward sloping supply curve. This is based on assumption that as new firms enter; factor prices are bid up through competition of more firms for limited factor services.

Could you please explain why long run supply curve can be downward sloping and implication for behaviours of price as demand increases over long run? Please illustrate this with graph.

 

Reference no: EM1372390

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