Consider the following:
(i) Silver is more abundant and easier to extract from some mines than from others. Is silver mining more likely to be a constant-cost or an increasing-cost industry? Justify your choice.
(ii) Production of flags requires nylon, sewing machines, and unskilled labor. Is flag production more likely to be a constant-cost or an increasing-cost industry? Justify your choice.
(iii) Farmers make up a significant proportion of the demand for arable land. Is farming more likely to be a constant-cost or an increasing-cost industry? Justify your choice.
(i) Some silver mines will be more efficient than others. As the industry expands, new mines will have higher break-even prices than existing mines. Therefore, silver mining is likely to be an increasing-cost industry.
(ii) Flag production does not require any specialized skills, so firms are likely to equally efficient and have identical cost curves. Flag production does not represent a significant fraction of the demand for nylon, sewing machines, or unskilled labor, so firms' costs will not be affected by industry expansion and contraction. Therefore, flag production is likely to be a constant-cost industry.
(iii) As the farming industry expands, the demand for arable land will rise. The higher cost of arable land will increase farmers' break-even prices. Therefore, farming is likely to be an increasing-cost industry.
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