InnovateCorp develops a new production method that reduces its cost of making a widget from $10 to $6. The market price for a widget is initially $12. Despite this significant cost reduction, after one year, InnovateCorp's profit margin is the same as its competitors, and the market price for a widget has fallen to $8. Which of the following best explains why InnovateCorp failed to capture sustained surplus profits from its invention?
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InnovateCorp develops a new production method that reduces its cost of making a widget from $10 to $6. The market price for a widget is initially $12. Despite this significant cost reduction, after one year, InnovateCorp's profit margin is the same as its competitors, and the market price for a widget has fallen to $8. Which of the following best explains why InnovateCorp failed to capture sustained surplus profits from its invention?
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