5) A firm introduces a new lower cost production technology. As a result a) The firm’s...

5) A firm introduces a new lower cost production technology. As a result a) The firm’s inverse supply curve shifts to the right; b) The firm’s inverse supply curve shifts to the left; c) The firm’s inverse supply curve does not shift; d) There is a movement along the firm’s inverse supply curve; e) c) and d).

6) The price for a good supplied by a firm falls. As a result a) The firm’s inverse supply curve shifts to the right; b) The firm’s inverse supply curve shifts to the left; c) The firm’s inverse supply curve does not shift; d) There is a movement along the firm’s inverse supply curve; e) c) and d).

Solutions

Expert Solution

1) The firm’s inverse supply curve will shift to right.
The low cost production technology will raise the level of production and this rising production level will shift the supply curve to right side. The firms will tried to increase the price level with respect to this rise in production. The low level of cost will increase the revenue of the firms. This increasing revenue will add to the investment of the firms. Thus the future production level will be protected and increased through this. The marginal cost will be inversely related to the supply curve. Thus the reduction in marginal cost will shift the supply curve to right.
2) The firm’s inverse supply curve shift to left.
The falling price will affect the supply sector. The price level has an inverse relation with the level of supply. So the falling price will reduce the supply and the firms will produce level. This will make a leftward shift of the supply curve. The falling price will affect the demand side and the demand sector will develop and increase the demand. Thus the supply curve shift left under this perspective.

Rahul Sunny answered 1 year ago

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