When technology increases the supply of a good and lower prices increase the quantity demanded, A. the economy is reallocating resources to achieve an efficient allocation. B. consumer surplus falls. C. the invisible hand is unnecessary. D. the marginal benefit of the good increases with the quantity produced. E. the economy is no longer efficient because the quantity changes.
Question
When technology increases the supply of a good and lower prices increase the quantity demanded, A. the economy is reallocating resources to achieve an efficient allocation. B. consumer surplus falls. C. the invisible hand is unnecessary. D. the marginal benefit of the good increases with the quantity produced. E. the economy is no longer efficient because the quantity changes.
Solution
The correct answer is A. the economy is reallocating resources to achieve an efficient allocation.
Here's why:
When technology increases the supply of a good, it means that more of that good can be produced at a lower cost. This typically leads to a decrease in the price of the good.
When the price of a good decreases, the quantity demanded for that good usually increases. This is because consumers are more willing and able to purchase the good at a lower price.
This process of increasing supply, decreasing price, and increasing demand is an example of the economy reallocating resources to achieve an efficient allocation. In other words, resources are being used in a way that maximizes the production and consumption of goods and services, which is considered efficient in economics.
Therefore, the correct answer is A. the economy is reallocating resources to achieve an efficient allocation.
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