a) To illustrate the effects of technological change on firm decisions and world market
outcomes, the example of the diamond industry will indicate the impact of technological
changes and assist in developing an economic model under a perfectly competitive market.
To exemplify this, De Beers Diamond Company was the dominant factor for the diamond
industry as it controlled a large portion of the market. This clearly shows its competitive
structure as a monopoly. The company controlled the price of diamonds to be sold to the
consumers and was known as “price maker” (Misshermes 2013). To increase the outputs and
decrease the costs, the company has adapted a new diamond technology known as chemical
vapor deposition (CVD). The CVD technology is useful to the industry by “producing
synthetic diamonds of jewelry-quality size, color, and clarity as well as customizes the
characteristics of individual diamonds.” ((Linde, De Meo, Epstein, & Fischler 2014) This
