If the entry of new firms into an increasing cost industry leads to higher average production costs for all existing firms, what is the most likely underlying cause of this phenomenon?

In an increasing cost industry, when new firms enter the market, they often demand more resources, like labor and raw materials. As the demand for these resources rises, their prices can increase, leading to higher average production costs for all firms, not just the newcomers. This happens because the supply of resources may not be able to keep up with the sudden increase in demand, causing costs to rise. For example, if a new restaurant opens in a small town, it may hire many chefs and buy more ingredients, which can drive up wages and food prices for all restaurants in that area. Therefore, the underlying cause of higher costs is the increased demand for limited resources as more firms enter the industry.