A technological breakthrough that reduces the cost of materials in a perfectly competitive industry would, in the long run,
A)lead to higher profits.
B)raise prices.
C)lower the output produced by each firm.
D)increase the number of producers.
E)decrease the number of producers.

Question

Quizplus · Accepted Answer

A technological breakthrough that reduces the cost of materials would make production less expensive for firms. In a perfectly competitive industry, firms are price-takers, meaning that they cannot influence market prices. Therefore, a reduction in production costs would lead firms to decrease their prices in order to stay competitive. As a result, more firms would be able to enter the industry as it becomes easier to earn a profit at the lower price levels. This would lead to an increase in the number of producers in the long run.

A Technological Breakthrough That Reduces the Cost of Materials in a Perfectly