In the figure given below, Panel A represents preexisting firms which are in long run equilibrium at price P₀ and output q₀.MC and AC represents the marginal cost and the average cost of the preexisting firms.Panel B represents a market where every seller has the smallest ability to affect prices.The market is in equilibrium at price P₀ and output Q shown by the intersection of the long-run supply curve (LRS) and market demand (D).

-Refer to Figure .Suppose some of the preexisting firms adopt the cost effective technology of the innovator while non-adopters that are incurring losses shut down.The high cost sellers produce the rest of the market output.What will happen to the equilibrium price level?
A)The price level will fall below P0 but remain positive.
B)The price level will remain at P0.
C)The price level will rise above P0.
D)The price level will fall to zero.

Question

In the figure given below, Panel A represents preexisting firms which are in long run equilibrium at price P₀ and output q₀.MC and AC represents the marginal cost and the average cost of the preexisting firms.Panel B represents a market where every seller has the smallest ability to affect prices.The market is in equilibrium at price P₀ and output Q shown by the intersection of the long-run supply curve (LRS) and market demand (D).

-Refer to Figure .Suppose some of the preexisting firms adopt the cost effective technology of the innovator while non-adopters that are incurring losses shut down.The high cost sellers produce the rest of the market output.What will happen to the equilibrium price level?
A)The price level will fall below P0 but remain positive. 
B)The price level will remain at P0. 
C)The price level will rise above P0. 
D)The price level will fall to zero.

Quizplus · Accepted Answer

The Answer of In the figure given below, Panel A represents preexisting firms which are in long run equilibrium at price P₀ and output q₀.MC and AC represents the marginal cost and the average cost of the preexisting firms.Panel B represents a market where every seller has the smallest ability to affect prices.The market is in equilibrium at price P₀ and output Q shown by the intersection of the long-run supply curve (LRS) and market demand (D).

-Refer to Figure .Suppose some of the preexisting firms adopt the cost effective technology of the innovator while non-adopters that are incurring losses shut down.The high cost sellers produce the rest of the market output.What will happen to the equilibrium price level?
A)The price level will fall below P0 but remain positive. 
B)The price level will remain at P0. 
C)The price level will rise above P0. 
D)The price level will fall to zero.

In the Figure Given Below, Panel a Represents Preexisting Firms