Show graphically the effect of technological advance on the price of music downloads. In a separate graph, show what happens to the price of CDs as a secondary effect of the new download technology.
What will be an ideal response?
The first graph shows a rightward shift of the supply of downloads as a result of change in technology, so that the price of downloads falls while equilibrium quantity increases (Figure 4-27). This causes a decrease in the demand for CDs, reducing price and quantity at equilibrium.
You might also like to view...
According to strategic trade policy, international trade largely involves firms which:
a. enjoy monopolistic power in the domestic market. b. has a high initial cost of production. c. pursues economies of scale. d. experiences diseconomies of scale. e. generates adequate employment in the domestic economy.
Which statement is true?
A. Entrepreneurial ability is considered a passive resource. B. All entrepreneurs are inventors. C. The entrepreneur has been the central figure in the long economic success in the U.S. D. The basic payment made to the owners of capital is rent.
A government budget deficit occurs when government revenues exceed government expenditures.
Answer the following statement true (T) or false (F)
Total revenue for a perfectly competitive firm producing six units of output is $48. Total revenue for producing eight units of output is $64. Given this information, the:
A. average revenue for producing eight units is $16. B. marginal revenue for producing the eighth unit is $16. C. firm should raise its price. D. marginal revenue for producing the eighth unit is $8.