Question

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. Suppose Hi-Tech's patent prevents other firms from using the new technology. Which of the following statements are true about what happens in the short run? Check all that apply. The price of books decreases. Hi-Tech's average-total-cost curve remains the same. Hi-Tech's profits increase. Hi-Tech's marginal-cost curve shifts downward.

Answer 1

Answer:

All firms get zero profit

Explanation:

Because

When patent expires, it causes free entry of new firms which increases market supply. The market supply curve shifts rightward which decreases price lower than P1. In new long run equilibrium, all firms earn zero economic profit

Answer 2

Answer:

d. Hi-Tech's marginal-cost curve shifts downward

Explanation:

In the event where Hi Tech prevents other other firms from using the new technology which sharply reduces the cost of printing books. Hi Tech's marginal-cost curve shifts downward.

Marginal cost can be defined as the additional cost incurred for the production of an additional unit of output. The formula is calculated by dividing the change in the total cost by the change in the product output.