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    Analyzing behavior of Increasing cost industry

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    Suppose you own a remodeling company. You are currently earning short-run profits. The home remodeling industry is an increasing cost industry. In the long run, what do you expect will happen to:

    a. Your firm's costs of production? Explain.
    b. The price you can charge for your remodeling services? Why?
    c. Profits in home remodeling? Why?

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    Solution Preview

    a. Your firm's costs of production? Explain.

    As firm is making short-run profits, new firms will enter into the market. Demand for input factors will increase. So, inputs will become ...

    Solution Summary

    The expert analyzes behavior of increasing cost industry.