Initially,a perfectly competitive market 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 ________.

Question

Quizplus · Accepted Answer

In the short run, the supply curve in the industry is fixed, so the price will fall due to the increase in supply from the 100 firms adopting the new technology. Firms with the new technology will have lower average costs, so they will be able to produce at a lower price and make positive economic profits. Firms with the old technology will not be able to compete and will incur an economic loss.

Initially,a Perfectly Competitive Market That Has 1,000 Firms Is in Long-Run