A new production technique that reduces costs for a price-taking firm in a competitive market will result in
A) widespread industry adoption and a lower price to consumers.
B) industry consolidation.
C) sustained positive economic profit for the first firms that adopt the technique.
D) a rightward shift in the demand curve.
E) entry by new firms.

Question

Quizplus · Accepted Answer

A price-taking firm has no control over the market price and must accept whatever price the market determines. Therefore, any cost savings from a new production technique will likely result in lower prices for consumers as firms compete for market share. This will lead to widespread industry adoption and increased efficiency in the market.

A New Production Technique That Reduces Costs for a Price-Taking