Suppose that the development of a new type of circuit lowers the costs of production in the microcomputer industry, which is perfectly competitive. The long-run effect will likely be
A) lower price and larger output
B) lower price and smaller output
C) higher price and larger output
D) higher price and smaller output
E) no change in price or output

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a decrease in production costs leads to a lower price and larger output as firms can produce more at a lower cost, passing savings onto consumers and stimulating demand.

Suppose That the Development of a New Type of Circuit