Demand increases in an increasing-cost industry that is initially in long-run competitive equilibrium. After full adjustment, price will be

Question

Quizplus · Accepted Answer

In an increasing-cost industry, as demand increases, the costs of production for firms also increase, often due to higher input prices as firms compete for limited resources. This leads to an increase in the price level in the long run as firms require higher prices to cover their higher costs.

Demand Increases in an Increasing-Cost Industry That Is Initially in Long-Run