Entry, Exit, and Supply Curves: Increasing Costs

We understand cost curves and entry and entry/exit decisions. Now we are going to explore how each firm’s decisions influence the supply curve. Here’s the key question: As industry output increases, what happens to costs? We look at three options: an increasing cost industry, a constant cost industry, and a decreasing cost industry.
First up, we look at oil as an example of an increasing cost industry. Other examples of increasing cost industries include copper, gold, and silver, coffee, and even the profession of nuclear engineers.
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[@zethayn]

I just found this channel and I think I'll stay here for longer! I love the explanation, thank you!

[@vinayaksangar1928]

Hello ! Firstly thanks for the amazing videos They r really great.!!!. I have a doubt? What exactly do you mean by increasing cost industries? Increasing cost industries are those such that if they have to increase their output their average cost curve shifts upward like housing more industries enter the market -> more need of wood->price of wood increases -> average cost increases I m not sure whether what i think is correct or not? If so than how is oil an increasing cost industry ? Is it due to its huge sunk cost involved to build another oil well or coal mine but it does not effects the average cost of existing oil mines just new oil mines have greater average cost in short run? Can u tell whether my inferences are correct i am very new in economic Thanks

[@IonSterpan]

Yes, increasing cost industries are those industries whose average firm's cost curve shifts upward (to the left) when new firms enter the industry. This occurs because the demand pressures for factors in limited supply drives the price of those factors up. The oil industry is an increasing cost industry because as new oil companies enter the industry to compete for oil fields, the cost of acquiring new oil fields is increasing. The new demand is increasing the price of old fields as well. It becomes increasingly more attractive to sell existing fields and exit the industry. But this means that a firm's opportunity cost of continuing to drill in the existing fields is also increasing.

[@MoJo01]

Why don't you guys number your episodes? How to go to the previous episode?

[@MarginalRevolutionUniversity]

The micro playlist is an easy way to navigate through the course: kzbin.info/aero/PL-uRhZ_p-BM4XnKSe3BJa23-XKJs_k4KY

[@MoJo01]

Thank you for your reply. You guys have a great set of videos rich of content. The thing is, a direct google search directed me to one of your vids. And at the beginning of your vid, it said: "As we discussed XYZ in the last video ......". Therefore since I didn't reach here using the playlist, I was unable to determine which was the previous video. Again, thank you for your reply and wonderful videos.

[@MarginalRevolutionUniversity]

Thanks for the info. It's very helpful. I get how that can be confusing. The problem with episode numbers is that sometimes we package up videos in different ways (like our Tragedy of the Commons playlist which has a selection of videos from our larger Micro course: kzbin.info/aero/PL-uRhZ_p-BM4BQ6TxGIXIDXTBwzOuxHN-). So it might be confusing for someone if the first video says episode 50 because that's what it is in Micro. But maybe there are other ways for us to solve it using a pinned comment or better links in the description. Any ideas let us know! And please keep the feedback coming, we read every bit of it. -Roman