How do Technology Shifts affect the Long-Run Average Cost Curve?

New developments in production technology can shift the long-run average cost curve in ways that can alter the size distribution of firms in an industry.

New production technologies do not inevitably lead to a greater average size for firms. On one side, the new technology may make it easier for small firms to reach out beyond their local geographic area and find customers across a state, or the nation, or even across international boundaries. This factor might seem to predict a future with a larger number of small competitors.

On the other side, perhaps the new information and communications technology will create “winner-take-all” markets where one large company will tend to command a large share of total sales.