Suppose a highly competitive industry is composed of multiple identically sized firms. The existing old technology and
Question:
Suppose a highly competitive industry is composed of multiple identically sized firms. The existing "old" technology and input prices in the industry result in a firm reaching minimum efficient scale at 1,000 units with an average cost of AC=$100. Next, a "new" technology is developed which lowers min AC to AC = $50, but raises minimum efficient scale to 50,000 units.
At a market price of $100 the total market quantity demanded is 250,000 units, and at a market price of $50 total market quantity demanded is 400,000 units. If so then there would be approximately
Question 8 options:
a)
250 firms in the industry under the old technology and 8 firms in the industry under the new technology.
b)
400 firms in the industry under the old technology and 20 firms in the industry under the new technology.
c)
200 firms in the industry under the old technology and 50 firms in the industry under the new technology.
d)
50 firms in the industry under the old technology and 10- firms in the industry under the new technology.