   Chapter 14, Problem 6PA

Chapter
Section
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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