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JAMB Economics 2010 Question 23

Question 23

Elasticity

An industry's supply curve is more likely to be elastic when firms are

  1. A.enjoying free entry and exit
  2. B.operating at full capacity
  3. C.operating below capacity
  4. D.maximizing profits.
Show the answer and explanation

Answer: A (enjoying free entry and exit)

Explanation

With free entry, new firms can join quickly when price rises, so industry output responds strongly to price.