Asked by Maurice Edwards on May 16, 2024
Verified
If a competitive firm successfully adopts a better production technology ahead of the others, then
A) its product price will become lower than the others'.
B) its average cost will become higher than the others'.
C) its profits will become higher than the others'.
D) its marginal revenue will become higher than the others'.
Production Technology
Engages in the methods, processes, and equipment used to produce goods and services, emphasizing efficiency and effectiveness.
Product Price
The expenditure involved in purchasing a good or service.
Average Cost
The expense associated with each unit's production, determined by splitting the total production costs by the units produced.
- Understand how advancements in production technology affect competition among firms.
Verified Answer
RM
Rayan MoselmaniMay 19, 2024
Final Answer :
C
Explanation :
Adopting a better production technology typically allows a firm to produce goods more efficiently, lowering its average costs. This can lead to higher profits because the firm can sell its products at the same market price as competitors but at a lower cost of production. The price doesn't necessarily become lower (A is incorrect because prices are determined by the market in competitive markets), the average cost doesn't become higher (B is incorrect), and marginal revenue doesn't change directly from technology adoption in competitive markets (D is incorrect) since it's determined by the market price.
Learning Objectives
- Understand how advancements in production technology affect competition among firms.