
a)
How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.
a)

Explanation of Solution
The
Introduction:
b)
How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.
b)

Explanation of Solution
The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.
Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.
Want to see more full solutions like this?
Chapter 67 Solutions
Krugman's Economics For The Ap® Course
- Published in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.arrow_forwardThe following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.arrow_forwardThe projects under the 'Build, Build, Build' program: how these projects improve connectivity and ease of doing business in the Philippines?arrow_forward
- Critically analyse the five (5) characteristics of Ubuntu and provide examples of how they apply to the National Health Insurance (NHI) in South Africa.arrow_forwardCritically analyse the five (5) characteristics of Ubuntu and provide examples of how they apply to the National Health Insurance (NHI) in South Africa.arrow_forwardOutline the nine (9) consumer rights as specified in the Consumer Rights Act in South Africa.arrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education





