A Cost-Saving Innovation in a Perfectly Competitive Industry Will Lead

question 96

Multiple Choice

A cost-saving innovation in a perfectly competitive industry will lead to:

• A)entry by new firms.
• B)economic profits for new firms.
• C)economic profits for a few firms for a short time.
• D)a leftward shift of the industry supply curve.

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Definitions:

Marginal Cost

The heightened expense incurred by fabricating an extra unit of a product or service.

Average Total Cost

The overall expense of manufacturing, including both fixed and variable costs, divided by the amount of product made.

Extra Unit

Refers to an additional quantity of a good or service, often used in the context of calculating marginal costs or benefits.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity produced, indicating the cost per unit of output.