1. An increasing-cost industry is one in which the average cost of production
as the total output of the industry
.
2. Arrows up or down: Costs
with output in an increasing-cost industry because input prices increase as the industry competes for scarce resources and firms may be forced to use less productive inputs.
3. Heterogeneous inputs in a perfectly competitive market will cause the industry to face
costs because as the firm produces more, it is forced to use
productive inputs.
4. In Table 24.4 on page 552, suppose the relationship between industry output and the total cost for the typical firm is linear, and each firm produces six shirts. If there are 400 firms in the industry, the total cost for the typical firm is $
, and the average cost per shirt is $
. Another point on the supply curve is a price of $
and a quantity of
shirts.
5. An increase in the price of shirts will cause firms to
the industry, and as output increases, thecost of production increases. Entry will continue untilequals
.
6. Land-use zoning that limits the amount of land for apartments generates a relatively
(flat/ steep) supply curve for housing, so an increase in the demand for apartments leads to a relatively
(large/small) increase in price.
7. An increase in the price of coffee increased the quantity supplied as land was converted from growing
to growing coffee. (Related to Application 5 on page 554.)