Answer to Question #218610 in Microeconomics for syira

Question

a)   If the advent of new and better technology in a perfectly competitive market leads to a large reduction in costs of production, how will this affect the market?

Answer 1

The reduction in costs of production will attract more firms to enter the market. This is because there is free entry and exit in the market in a perfectly competitive market. The reduced cost will also create more supply of goods in the market.