Consider an industry that is in long-run equilibrium. An increase in demand leads to an increase in the price of the good. We know that this is

Question

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In an increasing-cost industry, an increase in demand leads to an increase in the price of the good, which in turn leads to an increase in the cost of production due to scarcity of resources. This increase in production cost causes a decrease in the supply of the good, which increases the price even further until a new equilibrium is reached. This indicates that the industry is operating on the upward-sloping portion of the long-run average cost curve.

Consider an Industry That Is in Long-Run Equilibrium