Question

An improvement in technology causes a (an) a. leftward shift of the supply curve. b. upward movement along the supply curve. c. firm to supply a larger quantity at any given price. d. downward movement along the supply curve.

Short answer

An improvement in technology causes a firm to supply a larger quantity at any given price (option c). This is because technological advancements enable producers to increase output with the same resources, leading to a rightward shift of the supply curve.

Step-by-step solution

Option a: Leftward shift of the supply curve

Technological improvements generally lead to increased production capabilities, which in turn lead to a greater quantity of goods being produced at each price level. This change in the supply curve would be represented by a shift to the right, not the left. Therefore, option a is incorrect.

Option b: Upward movement along the supply curve

An upward movement along the supply curve occurs when the quantity of goods produced increases in response to a higher price, holding other factors constant. The question, however, refers to an improvement in technology, which is an external factor affecting production capabilities, not a change in price. Hence, option b is incorrect.

Option c: Firm to supply a larger quantity at any given price

This option is consistent with the impact of an improvement in technology. Technological advancements usually enable producers to produce more output with the same resources, which is equivalent to producing the same output at a lower cost. As a result, firms can supply a larger quantity of goods at any given price level, leading to a rightward shift of the supply curve. Option c is the correct choice.

Option d: Downward movement along the supply curve

A downward movement along the supply curve occurs when the quantity of goods produced decreases in response to a lower price, holding other factors constant. Similar to option b, this option does not consider the external factor of technological advancements that improve production capabilities. Thus, option d is incorrect. In conclusion, the correct answer is:

Answer

c. Firm to supply a larger quantity at any given price.

Key concepts

Technological Advancements

Technological advancements play a crucial role in influencing the supply curve by impacting how goods are produced. When a new technology emerges, it often allows companies to produce goods more efficiently. This means they can make more products with the same amount of resources. If a factory, for example, introduces a new machine that speeds up the production process, it can produce more goods in the same amount of time.
This enhanced productivity often leads to a couple of significant economic changes:

• The cost of production per unit usually decreases, allowing firms to offer more competitive pricing.
• Firms can supply more products to the market at every price level, shifting the supply curve to the right. This shift indicates that more quantity is supplied at every price point in the market.

Technological advancements thus are pivotal in growing the economy. They not only improve the efficiency of production but also increase the availability of goods for consumers.

Production Capabilities

Production capabilities refer to the maximum output that a firm can produce with the available resources and technology. Improving production capabilities largely depends on advancements in technology, enhancements in workforce skills, and betterment of operational efficiencies.
When a company enhances its production capabilities, it can meet greater demand without increasing costs significantly. This is largely because improved production techniques reduce waste, optimize resource usage, and streamline processes.

• Production capabilities might increase through better machinery or technology implementations, reducing time or costs associated with production.
• It can also be boosted by investing in workforce training, ensuring employees work more efficiently.

An increase in production capabilities means the firm is better equipped to ramp up production ahead of demand surges without facing immediate bottlenecks.

Quantity of Goods Produced

The quantity of goods produced is directly influenced by the production capabilities and technological advancements available to a firm. When production capabilities are enhanced, either through new technology or improved processes, a firm can increase its output.
For example, if a shoe company implements a new technology that doubles its production speed, the quantity of shoes produced can increase substantially without additional resource input. This boosts supply at each price level, leading to a rightward shift in the supply curve.

• Higher production quantities can lead to economies of scale, reducing the cost per unit as production expands.
• This often results in more competitive pricing strategies, benefiting consumers with lower prices.

The relationship between production capabilities, technological advancements, and quantity of goods produced underscores how integral these concepts are to understanding market dynamics and supply trends.