For basic goods there would be more demand (people who can't afford even basics would enter the market making the total market larger) in turn making it more attractive to compete there. People always go where there is opportunity.

We are also on a long term trend of prices coming down in any case.

This is not how economics works. There are supply curves and there are demand curves, then there is the quantity supplied and quantity demanded. If the demand for a product shifts up (increases) due to basic income, then the quantity demanded increases. Then inventories of that product decrease, indicating that the firms could start producing more and still be able to sell it. They do this, but there costs go up, since each unit that they produce now costs them more on average. [assuming they are producing with increasing marginal costs, which is generally true]

> assuming they are producing with increasing marginal costs, which is generally true

The norm is marginal production costs decreasing with scale. The usual exception to it is when those costs stay constant.

Unitary costs increasing with scale isn't unheard of, but it's also not common in any way.

Up to a certain point, yes. But, in the short term, firms must increase their production by, say, hiring more workers. They might now have a less optimal worker/capital ratio which would increase their per unit costs. In the long run, their costs are flatter but still could eventually increase with quantity, imagine they're using all the resources locally available and have to start importing from somewhere else, that's going to increase costs.

Everything will be automated. Cost per unit will be down. In an open competitive market without monopolies or price fixing cartels the price for high demand cheap basics gets driven down due to increased competition. For cheap basic good the main competitive strategy is to be cheaper than your rivals. It's the classic race to the bottom like we are seeing with low end electronics. The more the system fully automates and becomes hyper efficient the closer we move towards zero marginal cost.

So you say demand will increase and production will have to catch up. I think prices will go up, not down in such case.

How did you come to that conclusion? We can easily increase production to meet demand. In fact supply is a largely solved problem. The new problem is lack of demand.

Depends on how elastic the demand for the good is. Not everything can handle a large price hike like that. McDonald's, for instance, wouldn't be able to jack up their prices a whole lot, because then people simply wouldn't go there.