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Economics / Principles of Economics 6 / Chapter 14 / Problem Problems and Applications 14.6

Principles of Economics | 6th Edition | ISBN: 9780538453059 | Authors: N. Gregory Mankiw

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Suppose the book-printing industry is competitive and begins in a long-run equilibrium

Chapter 14, Problem Problems and Applications 14.6

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QUESTION:

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. a. Draw a diagram describing the typical firm in the industry. b. Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. What happens to Hi-Techsprofits and the price of books in the short runwhen Hi-Techs patent prevents other firmsfrom using the new technology?c. What happens in the long run when thepatent expires and other firms are free to usethe technology?

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QUESTION:

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. a. Draw a diagram describing the typical firm in the industry. b. Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. What happens to Hi-Techsprofits and the price of books in the short runwhen Hi-Techs patent prevents other firmsfrom using the new technology?c. What happens in the long run when thepatent expires and other firms are free to usethe technology?

ANSWER:

Step 1 of 4

The competitive industry consists of enormous small-sized firms that sell identical items to their customers. These firms can enter and leave the industry whenever they want as the industry involves no strict restrictions. Firms act as price takers in this industry as they can't control the market price due to their size.

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