If a Price-Taking Firm That Belongs to an Industry in Long-Run

question 37

Multiple Choice

If a price-taking firm that belongs to an industry in long-run equilibrium discovers a significant cost-saving technology,then

• A) all firms will enjoy positive economic profit for a short period of time.
• B) the rest of the industry will quickly adopt the new technology.
• C) the firm will enjoy positive economic profit forever.
• D) the firm will lower the price to drive the rest of the industry out of business.
• E) the firm will not implement the new technology,fearing a price war with the rest of the industry.

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Definitions:

Desirability

The quality of being wanted or wished for as being attractive, useful, or necessary.

Expectancy Theory

A motivational theory suggesting that an individual's effort level is based on the expectation that effort will lead to a desired performance level and reward.

Expectancy

The degree to which individuals believe that their effort will lead to effective performance and, consequently, a desired outcome.

Effort

The expenditure of physical or mental energy toward the accomplishment of a task or goal.