Cattle Manure Is an Input Often Used in Making Fertilizer

question 136

Essay

Cattle manure is an input often used in making fertilizer. Suppose a technique is discovered that can transform cattle manure into quality gasoline. What would happen in the fertilizer industry?

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Definitions:

Increasing Cost Industry

An industry in which the costs of production increase as the industry's output expands, typically due to resource limitations.

Decreasing-Cost Industry

An industry where the average cost of production decreases as the industry's output increases, often due to economies of scale.

Long-Run Industry Supply Curve

A graphical representation that shows the relationship between the price of a good and the total output of the industry over time, assuming all inputs are variable.

LRAC Curve

the Long-Run Average Cost curve, showing the lowest average cost at which any output level can be produced when all inputs are variable.