In an increasing-cost industry, A. all firms have decreasing returns to scale. B. all firms have constant returns to scale. C. all firms have increasing returns to scale. D. input prices increase when the industry expands and produces more output.

Question

Jimena Higgins

Business

17 July, 10:15

In an increasing-cost industry, A. all firms have decreasing returns to scale. B. all firms have constant returns to scale. C. all firms have increasing returns to scale. D. input prices increase when the industry expands and produces more output.

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Answers (1)

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Ashton Galvan · Answer 1

Answer: In an increasing cost industry, input prices rises when the industry expands and produces more output.

Explanation:

An increasing-cost industry is an industry where the costs for production rises as more companies compete. Production cost is low when there are few players in the industry. However, when there are many newcomers, the demand for resources rises. Subsequently, the costs of the resources (inputs) will increase. This situation thereby creates an increasing-cost industry.