Scenario: The figure below shows the supply and the demand for a good (left) and the cost curves of an individual firm in this market (right). Initially, all firms in this market have identical cost curves MC₁ and ATC₁, and the market is in equilibrium at point A. Subsequently, a new production technology has been developed for this product. Some of the existing firms as well as some new firms have adopted the new technology, and their cost curves are MC₂ and ATC₂.

-Refer to the figure above.At the initial equilibrium A,________.

Question

Scenario: The figure below shows the supply and the demand for a good (left) and the cost curves of an individual firm in this market (right). Initially, all firms in this market have identical cost curves MC₁ and ATC₁, and the market is in equilibrium at point A. Subsequently, a new production technology has been developed for this product. Some of the existing firms as well as some new firms have adopted the new technology, and their cost curves are MC₂ and ATC₂.
 
-Refer to the figure above.At the initial equilibrium A,________.

Quizplus · Accepted Answer

At equilibrium A, the market quantity supplied (QS) equals the market quantity demanded (QD). At this point, all firms in the market are earning zero economic profit (represented by ATC₁ intersecting with P₁). When the new technology is introduced, the MC₂ and ATC₂ curves shift downward, enabling the firms that adopted the new technology to produce at a lower cost and potentially earn positive economic profit (represented by the ATC₂ curve intersecting with P₂). As a result, both firms with old and new technologies can enter the market to meet the increased demand at the new equilibrium point B. Therefore, the correct answer is C.

Scenario: the Figure Below Shows the Supply and the Demand