A benevolent cat bestows a cost saving technology on a single firm in a perfectly competitive industry. After the blessed event, the cat leaves Earth never to return. Prior to the technologyâs introduction all firms in the industry had identical cost functions and had access to identical technology. All other firms realize that the new technology lowers costs, and know exactly by how much it will do so (i.e. there is no uncertainty about the technologies efficacy). The technology is completely transferable by whoever owns it. Moreover, transference does not result in the technologyâs depreciation. Under these assumptions demonstrate that despite having the cost-saving technology the recipient firm is unable to earn long-run economic profits. Since it canât earn long-run economic profits should the firm even accept the technology?
A benevolent cat bestows a cost saving technology on a single firm in a perfectly competitive industry. After the blessed event, the cat leaves Earth never to return. Prior to the technologyâs introduction all firms in the industry had identical cost functions and had access to identical technology. All other firms realize that the new technology lowers costs, and know exactly by how much it will do so (i.e. there is no uncertainty about the technologies efficacy). The technology is completely transferable by whoever owns it. Moreover, transference does not result in the technologyâs depreciation. Under these assumptions demonstrate that despite having the cost-saving technology the recipient firm is unable to earn long-run economic profits. Since it canât earn long-run economic profits should the firm even accept the technology?
