A constant-cost industry is an industry in which:

• A. the long-run average cost of production decreases as industry output expands
• B. the long-run average cost of production remains unchanged as industry output expands
• C. the long-run average cost of production increases as industry output expands
• D. the short-run marginal cost of production remains constant regardless of output

Answer: (B)

Verified step by step guidance

1. Understand the definition of a constant-cost industry: it is an industry where the long-run average cost (LRAC) of production does not change as the total industry output expands or contracts.
2. Recall that the long-run average cost curve shows the lowest possible cost of producing each level of output when all inputs are variable.
3. In a constant-cost industry, input prices and technology remain unchanged as the industry expands, so the LRAC curve is flat (horizontal).
4. Contrast this with decreasing-cost industries (where LRAC falls as output expands) and increasing-cost industries (where LRAC rises as output expands).
5. Therefore, the correct characterization is that the long-run average cost of production remains unchanged as industry output expands.