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Question
Macroeconomics
Posted 10 months ago
Washi tape is produced in a perfectly competitive market.
If the long-run supply curve for washi tape is upward sloping, which of the following is true?
Choose 1 answer:
A Washi tape is in a diminishing cost industry.
(B) Washi tape is an increasing cost industry.
(C) Washi tape is a constant cost industry.
D Washi tape is a parabolic cost industry.
(E) Washi tape is a decreasing cost industry.
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Answer from Sia
Posted 10 months ago
Solution
a
Long-Run Supply Curve Interpretation: An upward sloping long-run supply curve in a perfectly competitive market suggests that as the industry output increases, the costs of production also increase
b
Cost Structure Identification: Given the upward sloping long-run supply curve, the industry cannot be diminishing cost, constant cost, parabolic cost, or decreasing cost. These cost structures would imply a flat or downward sloping long-run supply curve
c
Increasing Cost Industry: An increasing cost industry is one where, as the industry expands, the input prices increase due to increased demand for inputs, leading to higher production costs
Answer
(B) Washi tape is an increasing cost industry.
Key Concept
Increasing Cost Industry
Explanation
An upward sloping long-run supply curve indicates that the industry is an increasing cost industry because production costs rise as output increases.
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