5. Problems and Applications Q5 Suppose the book-printing industry is competitiv

Question

5. Problems and Applications Q5

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books.

1.Short Run 2. Long Run STEP: 1 of uppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that harply reduces the cost of printing books. uppose Hi-Tech's patent prevents other firms from using the new technology. Vhich of the following statements are true about what happens in the short run? Check all that apply. Hi-Tech's average-total-cost curve shifts downward Hi-Tech's marginal-cost curve shifts downward. Hi-Tech's profits remain the same. The price of books decreases. Points: 1/1

Explanation / Answer

When other firms can use the technology in the long run, the supply curve will shift right as production increases. The price will be back to P1 and excess profits will be driven down to zero. All firms will earn zero profit. Firn’s ATC is back to it original level. Thus all points are correct here.

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