If all the firms in a competitive industry have adopted a technology for production, it is presumably the technology that minimizes their production costs . If that technology is outlawed, firms will have to revert to the second-best technology, which will increase their costs of production. This is represented by a shift to the left in the industry supply curve. At each price level, the quantity supplied will be less than before.

Just as a technological improvement will cause firms that adopt it early to earn economic profits that attract new entrants to the industry, prohibition of the cost-minimizing technology will cause economic losses and typically force some firms to exit the industry. Under perfect competition, profit is always maximized at the level of output where marginal cost equals the market price. The state of technology is one factor that determines the level of output at which this occurs.