If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium price, it is
A)a constant-cost industry.
B)an increasing-cost industry.
C)a decreasing-cost industry.
D)a fixed-cost industry.

Question

Quizplus · Accepted Answer

An increasing-cost industry occurs when the expansion of the industry causes the cost of resources to increase, thereby raising the minimum price necessary for firms to cover their costs in the long run. This is in contrast to constant-cost industries, which maintain the same cost structure regardless of industry size, and decreasing-cost industries, which experience lower costs as they expand. Fixed-cost industries have a fixed cost structure that does not change with changes in industry size.

If, as a Perfectly Competitive Industry Expands, It Can Supply