Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
As output increases, average costs decrease
B
As output increases, average costs remain constant
C
As output increases, average costs increase
D
As output increases, average costs fluctuate
Understanding the Answer
Let's break down why this is correct
Answer
An increasing cost industry is one where the costs of production rise as the industry expands. This happens because, as more companies enter the market and demand for resources grows, those resources become scarcer and more expensive. For example, if many farmers start growing the same crop in a region, the land suitable for that crop may become limited, driving up rental prices and costs for all farmers. This means that as the industry produces more goods, the cost of making each additional unit also increases. Overall, an increasing cost industry faces rising costs due to limited resources and higher competition.
Detailed Explanation
In an increasing cost industry, as a company makes more products, the cost to make each product goes up. Other options are incorrect because Some might think that making more products lowers costs; It's a common belief that costs stay the same when producing more.
Key Concepts
increasing cost industries
Topic
Increasing Cost Industries
Difficulty
easy level question
Cognitive Level
understand
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