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Suppose that the inputs used by the firms in this industry
are a type of nonrenewable resource; something in relatively fixed
supply such a petroleum products or some other mineral. As the
industry grows in size it will demand more of this input, bidding
its price up.
In such a case, as demand increases so would production costs;
and as we saw in the section on Cost Changes, this leads to new
higher long run equilibrium prices. This is the same result we would have if the graph to
the right shows a LRAC (long run average total cost) curve for the industry that provides inputs to the perfectly competitive
industry.
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