An increase in price causes exit from a constant cost industry.

Name: An increase in price causes exit from a constant cost industry.
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Question

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In a constant cost industry, the cost of production does not change with an increase in price. Therefore, firms would continue to operate and supply the same quantity at the higher price. Only in a decreasing cost industry would an increase in price cause exit because lower costs would be passed on to consumers, increasing demand and causing firms to increase output.

An Increase in Price Causes Exit from a Constant Cost