In the winter of 2012 the BC film industry went into a tailspin. Whereas at any given time during the past several years there may have been as many as 50 movies shooting on a given day, in January 2013 there were only 4. Naturally, there were calls from those within the industry demanding that the provincial government increase subsidies and tax concessions. When an industry is said to be “dying” what is usually meant is that firms in that industry
have revenues less than costs.

Question

In the winter of 2012 the BC film industry went into a tailspin. Whereas at any given time during the past several years there may have been as many as 50 movies shooting on a given day, in January 2013 there were only 4. Naturally, there were calls from those within the industry demanding that the provincial government increase subsidies and tax concessions. When an industry is said to be “dying” what is usually meant is that firms in that industry
have revenues less than costs.

suwhitney · Answer

a.	What do these costs represent according to the notion of opportunity costs?
b.	Given your answer to (a), why is it socially good to let dying industries die?