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CHAPTER 9 APPENDIX
1A.1 Disagree. In the long run, expansion in an industry may cause input prices to increase. This is one
1A.2 See the story in the text and Figure 9A.2 on page 212 for an increasing-cost industry, which is
reproduced here.
1A.3 In a constant-cost industry, the LRAC and LRIS curves are flat. As demand shifts left, the supply
Note that without a decrease in supply, the ongoing decrease in demand would lead to a decrease
1A.4 This statement is not accurate. An individual firm is experiencing diseconomies of scale when its
average costs go up when it increases its scale. Graphically this is represented by a firm moving
0
0
1A.5
In the first figure, the decrease in demand (D0 to D1) causes price to decrease from P0 to P1. This
In the second figure, the decrease in demand (D0 to D1) causes price to decrease from P0 to P1.
