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According to the source, what happens to production costs in a decreasing cost industry as the market expands, and what example does it give?
ACosts fall, thanks to better technology, as in high tech
BCosts rise, often due to scarce skilled labor
CCosts stay exactly the same; agriculture is given as the example
DCosts fall only because of government subsidies
Answer & Solution
Correct answer: A. Costs fall, thanks to better technology, as in high tech
1. A decreasing cost industry is defined by falling production costs as the market expands.
2. The source attributes this to industry-wide technology improvements or a more educated workforce.
3. It names high tech industries as a good example of this pattern.
4. Rising costs from scarce skilled labor describes the increasing cost case instead, and agriculture was the constant cost example given earlier.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 8 "Perfect Competition", section 8.3 | Entry and Exit Decisions in the Long Run_
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