Technological advance improves productivity in a purely competitive industry. This change will result in a(n):Multiple Choicedecrease in average fixed cost for a firm in the industry.increase in average variable cost for a firm in the industry.increase in the marginal cost curve for a firm in the industry.increase in the short-run supply curve for a firm in the industry.
Question
Technological advance improves productivity in a purely competitive industry. This change will result in a(n):Multiple Choicedecrease in average fixed cost for a firm in the industry.increase in average variable cost for a firm in the industry.increase in the marginal cost curve for a firm in the industry.increase in the short-run supply curve for a firm in the industry.
Solution
Technological advances typically lead to an increase in productivity. This means that a firm can produce more output using the same amount of inputs. In the context of a purely competitive industry, this would likely result in a decrease in average fixed cost for a firm in the industry.
Here's why:
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Technological advances often allow firms to produce more efficiently. This means they can produce more output with the same amount of inputs, or the same output with fewer inputs.
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In the short run, some costs are fixed, meaning they do not change with the level of output. These include costs like rent, salaries, and equipment.
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When productivity increases, a firm can spread these fixed costs over a larger number of units of output. This results in a decrease in average fixed cost.
Therefore, the correct answer is "decrease in average fixed cost for a firm in the industry."
Similar Questions
Consider a constant cost industry that is perfectly competitive and in which the demand curve is downward sloping. Further, starting from a long-run equilibrium, firms experience an improvement in technology that lowers the marginal cost and average total cost to the same extent. In the long run, we expect: [Tick all that apply]
When technology increases the supply of a good and lower prices increase the quantity demanded, A. the economy is reallocating resources to achieve an efficient allocation. B. consumer surplus falls. C. the invisible hand is unnecessary. D. the marginal benefit of the good increases with the quantity produced. E. the economy is no longer efficient because the quantity changes.
In the long run in a competitive industry, if demand increases and the industry is a decreasing-cost industry, then the industry supply curve is
An increase in technology increases supply.Group of answer choicesTrueFalse
Advances in technology create new products and lower the cost of producing existing products.
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