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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Suppose the book-printing industry is competitive and begins in a long-run equilibrium.

a. Draw a diagram showing the average total cost, marginal cost, marginal revenue, and supply curve of the typical firm in the industry.

b. Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. What happens to Hi-Tech’s profits and to the price of books in the short run when Hi-Tech’s patent prevents other firms from using the new technology?

c. What happens in the long run when the patent expires and other firms are free to use the technology?

Subpart (a):

To determine
The average total cost curve, marginal cost curve, marginal revenue curve and supply curve, profit, long run impact.

Explanation

The figure – 1 shows the average total cost curve, marginal cost curve, marginal revenue curve and supply curve.

Figure -1

The above figure, x axis shows the quantity of the output and y axis shows the price or the cost. From this figure, the average total cost curve is ATC1 and ATC2 , marginal cost curve is

Subpart (b):

To determine
The average total cost curve, marginal cost curve, marginal revenue curve and supply curve, profit, long run impact.

Subpart (c):

To determine
The average total cost curve, marginal cost curve, marginal revenue curve and supply curve, profit, long run impact.

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