If a price-taking firm that belongs to an industry in long-run equilibrium discovers a significant cost-saving technology,then the
A) firm will enjoy positive economic profit forever.
B) rest of the industry will be forced to exit,resulting in a monopoly.
C) firm will enjoy positive economic profit for a short period of time.
D) rest of the industry will experience economic losses.
E) rest of the industry will refuse to adopt the new technology.

Question

Quizplus · Accepted Answer

In a long-run equilibrium, all firms in the industry are earning zero economic profit. If one firm discovers a cost-saving technology, they will be able to lower their costs and therefore earn positive economic profit. However, this will attract new entrants into the industry, which will drive down the price and reduce the economic profit of all firms. Eventually, the industry will reach a new long-run equilibrium where all firms have adopted the new technology and are earning zero economic profit again. Therefore, the firm will only enjoy positive economic profit for a short period of time.

If a Price-Taking Firm That Belongs to an Industry in Long-Run