Final answer:
Economies of scale lead to a decrease in average production costs, which in a competitive market result in lower prices. New technology can affect the market by increasing supply and reducing prices. International trade allows for economies of scale in small economies through access to larger markets.
Step-by-step explanation:
If there are economies of scale in producing a memory chip, this implies that as production increases, the average cost of producing each additional unit decreases. Therefore, the correct answer to the student's question is 'the average cost of producing it will decrease, and competition will result in its price decreasing'. This is because as the cost of production falls, companies can lower their prices to stay competitive, which ultimately benefits the consumer with lower-priced goods.
For the sketching task based on a given table of semiconductor production costs, as the quantity produced increases, the average cost decreases, illustrating economies of scale. On a graph, this would typically look like a downward-sloping curve. In a perfectly competitive market, the introduction of new technology that reduces production costs would generally lead to an increase in supply, lower market prices, and as a result, could potentially drive profits down to zero, reflecting a new market equilibrium.
Finally, international trade can allow small economies to benefit from economies of scale by accessing larger markets, which enhances efficiency, leads to lower costs, and supports a competitive market environment with diverse product offerings.