A firm in a perfectly competitive market invents a new, Ask an Expert

Economics

A firm in a perfectly competitive market invents a new method of production that lowers its marginal costs.

What happens to its output?

What happens to the price it charges?

a. The firm has an employee who threatens to tell all other firms in the industry about how to implement this new technique. Will it be possible to bribe the employee not to do this? describe why or why not.

b. Why should this employee probably choose to tell only some of the other firms rather than all of them?

c. What factors will determine the best number of firms to sell the secret to? Assume that those who get the information keep the secret instead of selling it to still others.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9104691

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