📚 Learning Guide
Increasing Cost Industries
medium

In the context of increasing cost industries, which of the following statements are true? Select all that apply.

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

The entry of new firms decreases the average production costs for existing firms.

B

As new firms enter the market, the demand for scarce resources increases, leading to higher operational costs.

C

A leftward shift in the supply curve due to firm exits can lead to an increase in market prices.

D

Increasing cost industries are characterized by constant production costs regardless of market entry.

E

Higher wages resulting from increased demand for labor can affect the pricing strategy of firms.

Understanding the Answer

Let's break down why this is correct

Answer

Increasing cost industries are those where the cost of production rises as the output increases. This often happens because resources become more expensive or harder to find as production ramps up. For example, in agriculture, if a farmer wants to grow more crops, they might need to buy more land or hire more workers, which can drive up costs. Therefore, in these industries, as supply increases, the prices of goods may also rise to cover these higher costs. Understanding this concept helps explain why some industries struggle to meet high demand without raising prices.

Detailed Explanation

Other options are incorrect because Some might think that more firms mean lower costs for everyone; It might seem that new firms would just share resources.

Key Concepts

Increasing Cost Industries
Market Dynamics
Supply and Demand
Topic

Increasing Cost Industries

Difficulty

medium level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.