Initially, a Perfectly Competitive Industry That Has 1,000 Firms Is

question 80

Multiple Choice

Initially, a perfectly competitive industry that has 1,000 firms is in long- run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price _______ , firms with the new technology make _______ economic profit, and firms with the old technology _______.

• A) remains the same; positive; incur economic losses
• B) remains the same; zero; incur economic losses
• C) falls; positive; incur economic losses
• D) remains the same; positive; make normal profit

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Definitions:

Efficient Level of Output

The quantity of production that maximizes the difference between total revenue and total cost, or equivalently, minimizes average total cost.

Perfect Competitor

An idealized market structure in which many firms sell identical products, entry and exit are easy, and all buyers and sellers are well-informed, leading to perfect competition.

Inelastic Demand Curve

A situation where the demand for a good or service does not significantly change with a change in its price.

Marginal Revenue Curve

A graphical representation showing the additional revenue generated by selling one more unit of a product or service.