Which firms would choose toadopt the new technology

Reference no: EM132210342

Question: Go back to the model with firm performance differences in a single integrated market(pages 214-215). Now assume a new technology becomes available. Any firm can adopt the newtechnology, but its use requires an additional fixed-cost investment. The benefit of the new technology is that it reduces a firm's marginal cost of production by a given amount. (Chapter 8,Problem 4)

a. Could it be profit maximizing for some firms to adopt the new technology but not profitmaximizing for other firm to adopt that same technology? Which firms would choose toadopt the new technology? How would they be different from the firms that choose not toadopt it?

b. Now assume there also trade costs. In the new equilibrium with both costs and technology adoption, firms decide whether to export and also whether to adopt the newtechnology. Would exporting firms be more or less likely to adopt the new technologyrelative to nonexporters? Why?

Reference no: EM132210342

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