Final answer:
The supply curve of an increasing cost industry is inelastic due to rising production costs, including higher wages for scarce inputs like skilled labor, as the market expands, leading to a higher intersection for the new zero-profit level.
Step-by-step explanation:
The supply curve of an increasing cost industry represents the relationship between the quantity supplied by all firms in the industry and the prevailing market price. In an increasing cost industry, as the market size grows, both existing and entering firms see a rise in production costs. This could be due to limited resources like skilled labor, which become more expensive as demand for these workers increases.
The enhanced cost for the inputs drives production costs higher for all firms, causing the new zero-profit level to intersect at a higher price than previously. Consequently, the long-run supply curve in an increasing cost industry tends to be more inelastic, implying that the quantity supplied does not increase as much in response to an increase in price compared to a constant cost industry with a more elastic supply curve. Limited inputs, such as skilled labor, may become scarce and as the demand for these workers rise, wages increase, resulting in higher production costs for all firms in the industry. Therefore, the industry supply curve in an increasing cost industry is more inelastic.