An increase in the demand for a product and a reduction in its costs of production would
A)decrease the profits of producers.
B)encourage firms to leave an industry.
C)encourage firms to enter an industry.
D)cause a shortage of the product.

Question

Quizplus · Accepted Answer

An increase in demand for a product typically leads to higher prices, and a reduction in production costs increases profit margins. Both factors make the industry more attractive, encouraging firms to enter.

An Increase in the Demand for a Product and a Reduction