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

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter15: The Shortcomings Of Free Markets

Section: Chapter Questions

Problem 5TY

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