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The final possibility is that, as the demand for the output
of the perfectly competitive industry grows, firms which supply to the industry realize economies of scale. In other words, suppliers to the industry exhibit increasing
returns to scale or have LRAC (long run average total cost) curves that are downward sloping, as shown.
This is exactly what happens in industries that build products
which use integrated circuits (computers, TVs, stereos, cell phones
etc.) Not that any of these is perfectly competitive (far from
it) but as these industries grow in size the firms, which produce
the specialized chips needed for these products, recognize economies
of scale. This is one reason next year's TV, stereo, or computer will
be better and cheaper than this year's.
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