📚 Learning Guide
Increasing Cost Industries
easy

Which of the following best describes increasing cost industries in the context of economies of scale?

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Choose the Best Answer

A

Industries that benefit from lower per-unit costs as production increases

B

Industries where costs increase as production expands

C

Industries that achieve constant costs regardless of production scale

D

Industries that experience decreasing costs with increased production

Understanding the Answer

Let's break down why this is correct

Answer

Increasing cost industries are those where, as production increases, the costs of making each additional unit also rise. This happens because, in these industries, resources may become more difficult to obtain or less efficient to use as companies try to produce more. For example, if a factory tries to make more cars, it might need to hire more workers or use special materials that are harder to find, leading to higher costs. Unlike decreasing cost industries, where producing more can lead to savings, increasing cost industries face challenges that raise expenses as they expand. Therefore, businesses in these industries must be careful about how much they grow, as it could hurt their profits.

Detailed Explanation

Increasing cost industries are those where costs go up as you make more products. Other options are incorrect because This option suggests that costs go down when making more products; This option says costs stay the same no matter how much is produced.

Key Concepts

economies of scale
Topic

Increasing Cost Industries

Difficulty

easy level question

Cognitive Level

understand

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