Question

An increase in the demand for movies also increases the salaries of actors and actresses. Is the​ long-run supply curve for movies likely to be horizontal or upward​ sloping? Explain. If an increase in the demand for movies also increases the salaries of actors and​ actresses, then the​ long-run supply curve for movies is likely to be A. upward sloping because increases in output raise input prices . B. horizontal because the input supply curve is horizontal. C. upward sloping because increases in output lower input prices. D. horizontal because returns to scale are constant . E. horizontal because the input supply curve is upward sloping .

Answer 1

A

Step-by-step explanation:

If there is an increase in the demand for movies, producers would want to make more movies. This would lead to an increase in the demand for actors

The demand for actors can be seen as derived demand.

Derived demand is demand for a good or service that is dependent on the demand for another good.

Due to the increase in the demand for actors, there would be a rightward shift of the demand curve for actors. This would lead to a rise in equilibrium salary for actors and an increase in equilibrium quantity of actors.

As a result of the increase in the salary of actors, the cost of producing a movie increases.