What happens in a decreasing-cost industry when some firms leave and the industry's output contracts?
A) The average cost will increase.
B) The average cost will decrease.
C) The total cost will decrease.
D) The product price will decrease.

Question

Quizplus · Accepted Answer

In a decreasing-cost industry, as firms leave and output contracts, the average cost of production increases because the benefits of economies of scale are reduced.

What Happens in a Decreasing-Cost Industry When Some Firms Leave