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What will be the effect on short-run price, quantity, and profit if a technological development reduces marginal costs in a competitive market

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Answer:

Price

The price in the short-run will decrease because with less marginal costs, producers would produce more goods and services which would shift the supply curve to the right. The new intersection with the demand curve will be at a lower price.

Quantity

As said above, producers would produce more goods and services which means that the quantity supplied will increase.

Profit

This is a competitive market. Each firm will earn zero profits because the drop in price will match the drop in marginal costs to ensure that firms are not making anything extra.

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