A decreasing-cost industry is one in which
A) contraction of the industry will decrease unit costs.
B) input prices fall or technology improves as the industry expands.
C) the long-run supply curve is perfectly elastic.
D) the long-run supply curve is upsloping.

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, input prices fall or technology improves as the industry expands, leading to a downward sloping long-run supply curve. This means that as the industry grows, unit costs decrease, allowing firms to produce more output at lower prices. Therefore, contraction of the industry will actually increase unit costs.

A Decreasing-Cost Industry Is One in Which