earlier in the chapter on Production, Costs, and Industry Structure. However, why will costs remain the same?

In this type of industry, the supply curve is very elastic. Firms can easily supply any quantity that consumers

demand. In addition, there is a perfectly elastic supply of inputs—firms can easily increase their demand for

employees, for example, with no increase to wages. Tying in to our Bring it Home discussion, an increased

demand for ethanol in recent years has caused the demand for corn to increase. Consequently, many farmers

switched from growing wheat to growing corn. Agricultural markets are generally good examples of constant-

cost industries.

For an increasing cost industry, as the market expands, the old and new firms experience increases in their
206 8 • Perfect Competition

costs of production, which makes the new zero-profit level intersect at a higher price than before. Here
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