When considering long-run adjustments, which of the following is not a characteristic of an increasing cost industry?

Select the correct answer below:
A. The equilibrium price increases in response to an increase in quantity.
B. The long-run supply curve is upward sloping.
C. The long-run supply curve is downward sloping.
D. An increase in demand is met with an increase in quantity supplied.

Question

28-06-2024
Business

Answered

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When considering long-run adjustments, which of the following is not a characteristic of an increasing cost industry?

Select the correct answer below:
A. The equilibrium price increases in response to an increase in quantity.
B. The long-run supply curve is upward sloping.
C. The long-run supply curve is downward sloping.
D. An increase in demand is met with an increase in quantity supplied.

Sagot :

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Final answer:

In an increasing cost industry, the long-run supply curve is upward sloping as production costs increase with output, leading to a higher equilibrium price.

Explanation:

In an increasing cost industry, the long-run supply curve is upward sloping as production costs increase with output. This means that as demand rises, the cost of production for firms also increases, leading to a higher equilibrium price than before.

Unlike in a decreasing cost industry where the long-run supply curve is downward sloping due to decreasing production costs as output rises, in an increasing cost industry, the equilibrium price increases in response to an increase in quantity demanded.

Therefore, an increase in demand is met with an increase in quantity supplied in an increasing cost industry, which is a defining characteristic of how these industries adjust in the long run.

Learn more about Increasing cost industry characteristics here:

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Final answer:

Explanation:

Learn more about Increasing cost industry characteristics here:

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