Domar’s (1966) contribution to this controversy consists of the introduction of an upward-sloping supply schedule for labour (5), also reflecting the possibility of restricting the entry of new members. As is to be seen from figure 3, this modification leads to a positive supply schedule of the firm.
With regard to the second assumption, Vanek (1970, p.54-55) shows that with joint production a negative supply schedule is still a likely nut not necessary outcome. The reason for this is that an increase in the price of a product X1 induces the firm to substitute production of X1 for X2, thereby also shifting the marginal revenue curve upwards.