Essay
In a perfectly competitive market, long-run average cost and long-run marginal cost are constant and equal: LAC = LMC = $8 for a typical firm. However, one of the firms discovers a technological innovation lowering its average cost and marginal cost to $7. How will this affect the equilibrium price? If all firms can take advantage of the innovation, what is the impact on the market price and industry profits?
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Because only one firm has a lower MC, th...View Answer
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