If a competitive firm successfully adopts a better production technology ahead of the others, then
A) its product price will become lower than the others'.
B) its average cost will become higher than the others'.
C) its profits will become higher than the others'.
D) its marginal revenue will become higher than the others'.

Question

Quizplus · Accepted Answer

By adopting a better production technology, the firm can lower its average cost of production, which allows it to increase its profits. The firm can either maintain its price to increase its profit margin or lower its price to attract more customers and increase its market share. While its marginal revenue may be higher than the others, it is its profits that will ultimately increase due to its lower average cost.

If a Competitive Firm Successfully Adopts a Better Production Technology