For a constant-cost industry,
A) the industry must consume a large share of the inputs in the market
B) the entry of one additional firm causes a pecuniary externality
C) inputs must be in abundant supply

Question

Quizplus · Accepted Answer

In a constant-cost industry, the cost of production does not change as more firms enter or exit the market. This implies that the industry can expand without driving up input prices. Therefore, for a constant-cost industry to be sustainable, the inputs required for production must be readily available and in abundant supply. Thus, option C is the best choice. Option A is incorrect because a large share of inputs in the market does not guarantee a constant-cost industry. Option B is incorrect because the entry of one additional firm does not cause a pecuniary externality in a constant-cost industry.

For a Constant-Cost Industry