Question

In a constant cost industry, __________ in demand will cause ______________ in the cost of production...

In a constant cost industry, __________ in demand will cause ______________ in the cost of production for the firms.

a) an increase; an increase

b) an increase; a decrease

c) an increase; no change

d) a decrease; no change

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Answer #1

Answer - correct option is C

Reason - A constant cost industry occurs due to entry of new firms which is promoted due to increase in demand and this increase in demand results in no change in long run average cost curve , this means that there will be no change in cost of production of firms. Therefore in constant cost industry, increase in demand will cause no change in the cost of production for the firms.

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