What happens in a decreasing-cost industry when some firms leave and the industry's output contracts?
A)The average cost will increase.
B)The average cost will decrease.
C)The total cost will decrease.
D)The product price will decrease.

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, as firms leave and output contracts, the average cost increases because economies of scale are reduced, leading to higher costs per unit.

What Happens in a Decreasing-Cost Industry When Some Firms Leave