Over the last two decades, the price of personal computers in real as well as nominal terms has declined markedly. Does this mean that the personal computer industry is decreasing-cost and that the long run supply curve for personal computers is downward sloping?

Am I correct with this answer?

No one can say for sure, with more firms entering the market it drives the price down even though the demand for the product increases. Economists imply this is a rise of competition from an initial monopoly position and not a movement along an industry’s long run supply curve.

I am not an economics person, however, three factors in PC prices seems to me to predominate: Technical innovation, in memory, displays, and LSI chips; Moving assembly from the US to SE Asia; and reduced transportation costs mainly due to efficiency.

As bobpursley noted, technology is a major factor in reducing costs.

A simple Supply/Demand graph:
1. Given a market with equilibrium point e;
2. Supply shifts right due to technology;
3. Price decreases, output increases.

I don't particularly care for your answer. Sorry.

Here is my answer:
The decline in the nominal price of personal computers is almost exclusively due to the multitude of improved technologies in production. The improved technologies keeps shifting out the supply curve; and so, we observe decreases in prices.

The supply curve for computers (or anything else for that matter) should be measured with fixed technologies. In such a measurement, the long-run supply would certainly be upward sloping.

Your explanation is partly correct, but let's break it down further to fully understand the concept.

The decrease in the price of personal computers over the past two decades can be attributed to various factors, including technological advancements, economies of scale, and increased competition. Technological advancements have led to improvements in production processes, making it more efficient and reducing costs. Additionally, as the demand for personal computers has increased over time, economies of scale have come into play. This means that as the volume of production increases, the average cost per unit decreases.

The increased competition in the personal computer industry has also contributed to the decline in prices. As more firms enter the market, they compete with each other to capture market share. In order to attract customers and gain a competitive edge, these firms often lower their prices. This competition leads to lower prices for consumers.

However, it is important to note that the long-run supply curve for personal computers may not necessarily be downward sloping. While the decrease in prices indicates that the industry has experienced decreasing costs, it does not automatically mean that the long-run supply curve is downward sloping.

In the long run, firms can adjust their production capacities and inputs to meet changes in demand. If demand for personal computers were to increase significantly, firms would invest in expanding production, which could result in an upward sloping supply curve. Conversely, if demand were to decrease, firms might reduce production capacities, leading to a downward sloping supply curve.

Therefore, the price decline in personal computers does not conclusively determine the slope of the long-run supply curve. It is necessary to consider factors such as demand, production capabilities, and overall industry dynamics to determine the shape of the supply curve.