In an increasing-cost industry, expansion of output:
A) causes input prices to rise as demand for them grows.
B) leaves input prices constant as input demand grows.
C) causes economies of scale to occur.
D) occurs under conditions of increasing returns to scale.
E) occurs without diminishing marginal product.

Question

Quizplus · Accepted Answer

In an increasing-cost industry, expansion of output causes input prices to rise as demand for them grows, leading to higher production costs. This is due to the limited supply of certain inputs that may become more expensive as the industry expands, such as skilled labor or natural resources.

In an Increasing-Cost Industry, Expansion of Output