Assume that one firm in a perfectly competitive market adopts a technological innovation that enables it to produce at a lower cost per unit than competing firms in the short run.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

In the long run, competing firms will need to adopt the new technology in order to lower their costs and remain competitive with the innovating firm. This is because the innovating firm will have a cost advantage over the other firms, which will allow it to offer lower prices to consumers, ultimately causing the other firms to lose market share and profitability. As a result, the other firms will need to copy the innovating firm's technology to stay in business. Therefore, choice D is correct. Choices A, B, C, and E are incorrect because they do not accurately represent the likely outcomes of this scenario.

Assume That One Firm in a Perfectly Competitive Market Adopts