A perfectly competitive industry is in long-run equilibrium. Some firms in the industry adopt new technology that reduces the average total cost of producing the good. In the long run, the price is ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.

Question

Quizplus · Accepted Answer

The adoption of new technology will result in a decrease in average total cost, leading to a shift in the industry's supply curve to the right. This will result in a lower price in the long run due to the increase in supply. Firms that adopt the new technology will be able to produce at a lower cost and make zero economic profits in the long run. Firms that stick with the old technology will have relatively higher costs, leading to zero economic profits or even losses. As a result, the old technology firms will either switch to the new technology or exit the industry.

A Perfectly Competitive Industry Is in Long-Run Equilibrium