In an increasing-cost industry,the average cost of production increases as the total output increases due to

Question

Quizplus · Accepted Answer

In an increasing-cost industry, as the total output increases, the demand for inputs like labor, raw material, and other resources also increases. As a result, their prices also increase. This increases the average cost of production, making Option A the correct choice. Option B is incorrect because price equals marginal cost only in perfect competition, which is not always the case in an increasing-cost industry. Option C is incorrect because increasing demand for output may lead to economies of scale and lower average cost, which is contrary to the description of an increasing-cost industry.

In an Increasing-Cost Industry,the Average Cost of Production Increases as the Total