Question

now suppose the patent expires and other firms are free to use the technology. which of the following statements are true about what happens in the long run? check all that apply. the market price falls to p2 . all firms' average-total-cost curves decline to atc2 . all firms make positive profits.

Answer 1

If a patent expires and technology becomes freely available, in the long run, the market price may decrease and average-total-cost curves may decline, but it is not certain that all firms will make positive profits; the market will adjust to reach a new equilibrium where firms make zero economic profits.

Step-by-step explanation:

When a patent expires and other firms are free to use the technology, several outcomes are possible in the long run. Firstly, the market price may fall due to increased competition, which can result in a new equilibrium price, P2. Secondly, the increased competition and entry of new firms could lead to economies of scale and potentially more efficient production methods, which would cause all firms' average-total-cost (ATC) curves to decline, potentially to ATC2. However, it is not necessarily true that all firms will make positive profits in the long run. In a perfectly competitive market, firms enter and exit the market based on profitability, driving profits to a zero-profit equilibrium in the long run, where P = MR = MC and P equals average cost.