Let's consider a perfectly competitive market .Consider that the marginal and average costsare equal. At the initial equilibrium, the price isP1, the marginal cost is MC1 and quantity isQ1. The impact of the process innovationgenerates a fall in costs to AC2 = MC2.Assuming that there is no patent system andthe economy remains perfectly competitive, aprocess innovation means that:Select one:%|а.the price to consumers will fall and theinnovative firm will gain market powerb.the price to consumers will increase due tomarket power gained by the innovative firmC.the price to consumers will fall and the marketpower of the will remain the same

The perfect competition is the type of market which has a large number of buyers and sellers of…

а. the price to consumers will fall and the innovative firm will gain market power b. the price to consumers will increase due to market power gained by the innovative firm С. the price to consumers will fall and the market power of the will remain the same

а. the price to consumers will fall and the innovative firm will gain market power b. the price to consumers will increase due to market power gained by the innovative firm С. the price to consumers will fall and the market power of the will remain the same

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Let's consider a perfectly competitive market .
Consider that the marginal and average costs
are equal. At the initial equilibrium, the price is
P1, the marginal cost is MC1 and quantity is
Q1. The impact of the process innovation
generates a fall in costs to AC2 = MC2.
Assuming that there is no patent system and
the economy remains perfectly competitive, a
process innovation means that:
Select one:
%|
а.
the price to consumers will fall and the
innovative firm will gain market power
b.
the price to consumers will increase due to
market power gained by the innovative firm
C.
the price to consumers will fall and the market
power of the will remain the same

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