Suppose that entry of new firms into an industry significantly increases the market demand for a key input.If supply of the key input is very price inelastic,then,for each firm in the industry in the long run,

Question

Quizplus · Accepted Answer

When the supply of a key input is very price inelastic, an increase in demand due to new firms entering the industry will lead to higher input prices. This results in external diseconomies, causing each firm's average total cost (ATC) curve to shift upward.

Suppose That Entry of New Firms into an Industry Significantly