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Q. A firm in a perfectly competitive market invents a new method of production which lowers its marginal costs. Illustrate what happens to its output? Illustrate what happens to the price it charges?
a. The firm has an employee who threatens to tell all other firms in the industry about Explain how to implement this new technique. Will it be possible to bribe the employee not to do this? Explicate why or why not.
b. Why should this employee probably select to tell only some of the other firms rather than all of them?
c. Illustrate what factors will conclude the best number of firms to sell the secret to? (Suppose which those who get the information keep the secret instead of selling it to still others.)
Assume the price falls to $ 7.50. What think would be a short-run impact on the production of the company. What would be the long term.
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