Joe is self-employed in a store that has a rental value of $500 a month which he pays, but he can vacate the building without giving notice. His other expenses are $100 a month for maintenance. He makes $25,000 a year on net sales (total revenue minus the wholesale cost of the product). If he quit his job and worked the same number of hours elsewhere at a job he liked equally well, he estimates that he could make $20,000 a year. No one else can be hired to work in the store.
The expansion of the car manufacturing industry causes an improvement in the assembly line, so reducing charges to each firm in that industry. This is an example of
Choose one answer.
a. Constant returns to scale
b. A decreasing-cost industry
c. A decreasing returns to scale
d. An increasing-cost industry