Six months ago the cost of an important input in an industry increased. Then, three months later another change occurred. Production engineers invented a new method that uses fewer raw materials for the same level of production. If these were the only two events that influenced production in the last six months, what has been the influence on the supply? a. Six months ago the supply curve shifted to the left, and then three months ago the quantity supplied at each price fellb. The first event caused production to decrease and supply to drop, but the second event increased supply above what it had been originally. c. The influences of both events had equal effects on the supply, only one was negative and the other positive so that they perfectly balanced outd. The event of six months ago caused added costs to production and then lowered supply. The event of three months ago allowed more to be produced at each price; so the supply increased.

Question

Business

Shaniya Madden

28 April, 00:47

Six months ago the cost of an important input in an industry increased. Then, three months later another change occurred. Production engineers invented a new method that uses fewer raw materials for the same level of production. If these were the only two events that influenced production in the last six months, what has been the influence on the supply? a. Six months ago the supply curve shifted to the left, and then three months ago the quantity supplied at each price fellb. The first event caused production to decrease and supply to drop, but the second event increased supply above what it had been originally. c. The influences of both events had equal effects on the supply, only one was negative and the other positive so that they perfectly balanced outd. The event of six months ago caused added costs to production and then lowered supply. The event of three months ago allowed more to be produced at each price; so the supply increased.

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Answers (1)

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Trace Peck · Answer 1

D

Explanation:

The first event caused an increase in the cost of production, then producers with the same amount of resources could produce less and for instance the total supply decreased (shifted to the left). Three months later, production process was optimized because with fewer raw materials the firm could produce the same number of units. This caused an increase in the total supply (shift to the right) because with the same resources, firms can produce more units. We do not know the magnitude of this changes, then we cannot affirm that the second event increased supply above what it had been originally because the second event could counteract the first event.