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Which of the following could cause an industry to be an increasing-cost industry?

Which of the following could cause an industry to be an increasing-cost industry?

A. The development of subindustries in response to industry growth.

B. The factor-price effect.

C. Identical break-even prices across firms.

D. Substantial economies of scale in production.



Assume dental care is provided by a competitive industry. A new government regulation requires each dentist to take a costly new exam for certification. What happens to the price of dental care?

A. The price of dental care rises in the short run and rises further in the long run.

B. The regulation will cause higher prices in the short run, but it will have no long-run impact.

C. There is no change in the short run, but dentists will exit and prices will rise in the long run.

D. The exam is a sunk cost, so the price of dental care does not change in either the short run or the long run.



Suppose notebooks are produced by a competitive constant-cost industry. Which of the following must cause Nanna's Notebooks to exit the industry in the long run?

A. Nanna's is notified of a rent increase, but her competitors' rents are unchanged.

B. A fire destroys half of Nanna's inventory.

C. A photographer wins a $10,000 judgment from a lawsuit charging that Nanna's used his photos on notebook covers without permission.

D. The price of cardboard used in notebook production rises.

Top Answer

A. The development of subindustries in response to industry growth. D. The exam is a... View the full answer

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