Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Production costs decrease due to economies of scale
B
Production costs remain constant regardless of output
C
Production costs increase due to the higher resource prices needed for additional output
D
Production costs fluctuate randomly with output changes
Understanding the Answer
Let's break down why this is correct
Answer
In increasing cost industries, when a company produces more goods, the cost of making each additional unit usually goes up. This happens because resources like labor and materials become scarcer or more expensive as production ramps up. For example, if a factory makes more toys, it might need to hire additional workers who demand higher wages, or it may have to pay more for extra raw materials. As a result, the overall cost of production increases, making it less efficient to produce large quantities. Therefore, in these industries, increasing output can lead to higher average costs and reduced profitability.
Detailed Explanation
In increasing cost industries, making more products usually costs more. Other options are incorrect because Some might think that making more products lowers costs; It's a common mistake to believe costs stay the same no matter how much is produced.
Key Concepts
production costs
resource allocation
Topic
Increasing Cost Industries
Difficulty
medium level question
Cognitive Level
understand
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