When a firm experiences a reduction in its marginal cost due to technological advancements, it can increase its output level while maintaining its price as a price taker in a perfectly competitive market. This change primarily affects the firm's _____ costs.

When a firm experiences a reduction in its marginal cost because of new technology, it can produce more goods without raising its prices. In a perfectly competitive market, firms are price takers, meaning they accept the market price and cannot influence it. The decrease in marginal cost mainly affects the firm's variable costs, which are the costs that change with the level of output, like materials and labor. For example, if a bakery improves its oven technology, it can bake more bread at a lower cost per loaf. This allows the bakery to increase production while keeping the price of bread the same, leading to potentially higher profits.