Final answer:
The introduction of new technology in a perfectly competitive market that reduces production costs can lead to a lower market price, decreased break-even point for businesses, and increased supply. Firms that do not adopt the new technology may face competitive disadvantages, while consumers enjoy lower prices and more product availability.
Step-by-step explanation:
In a perfectly competitive market, if new technology leads to a substantial reduction in costs of production, it generally results in several market-wide effects. First, firms that adopt the new technology may experience lower production costs, which allows them to lower their prices without sacrificing profitability. This can lead to a reduction in the market price for the goods produced as other firms also adopt the technology or are forced to reduce their prices to stay competitive. Additionally, the decrease in production costs means that companies can achieve profitability at a lower price point, effectively reducing their break-even point. This can enable businesses to survive in the market even with a lower sales price or quantity, and in the long run, it might increase the total supply of the product in the market. Consumers benefit from the reduced prices and increased product availability, which could result in a higher quantity demanded. Companies failing to adopt the new technology may struggle to compete and could be forced out of the market, leading to potential market restructuring around the new technology and cost structures. In summary, this technological innovation could increase market efficiency, lower prices, increase supply, and potentially alter the market structure towards those who utilize the new technology effectively.