Consider the textile industry,which we assume to be a competitive industry,and which experiences continuous cost-reducing technological change.Which of the following statements best describes this industry?
A)High-cost textile mills will co-exist with low-cost mills as long as the revenue for the high-cost mills is covering their variable costs.
B)The price of the product is determined by the minimum ATC of the lowest-cost plants.
C)All textile mills in the industry will be earning zero economic profits or losses.
D)Both A and B
E)Both B and C

Question

Quizplus · Accepted Answer

In a competitive industry with continuous cost-reducing technological change, the price of the product is determined by the minimum ATC of the lowest-cost plants (B), and high-cost textile mills will co-exist with low-cost mills as long as the revenue for the high-cost mills is covering their variable costs (A).

Consider the Textile Industry,which We Assume to Be a Competitive