Assume that one firm in a perfectly competitive market adopts a technological innovation that enables it to produce at a lower cost per unit than competing firms in the short run. Which of the following statements is correct?
a. The innovating firm will earn above-normal profit in the long run.
b. All the competing firms will be forced to exit the market in the long run.
c. This is an example of a decreasing cost industry.
d. Competing firms will need to adopt the new technology in the long run in order to survive.
e. Only new firms entering the industry with new-technology plants will be able to compete with the innovating firm.
D
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