Microeconomics Exam II Review – Step-by-Step Guidance

Q1. Refer to the figure above. A technological advancement would be represented by a movement from:

Background

Topic: Supply Curve Shifts

This question tests your understanding of how technological advancements affect the supply curve in a market. In microeconomics, a technological improvement typically makes production more efficient, allowing firms to supply more at every price level, which shifts the supply curve.

Key Terms and Concepts:

• Supply Curve (S1, S2): Shows the relationship between price and quantity supplied.

• Technological Advancement: An improvement in technology that reduces production costs and increases supply.

• Shift vs. Movement: A shift means the entire curve moves; a movement means a change along the same curve.

Step-by-Step Guidance

1. Identify which curves represent the original supply (S1) and the new supply after the technological advancement (S2).

2. Recall that a technological advancement increases supply, which means the supply curve shifts to the right (from S1 to S2).

3. Look at the figure and determine which movement (A to B, B to A, S1 to S2, or S2 to S1) matches a rightward shift of the supply curve.

4. Remember, a shift from S1 to S2 means at every price, a greater quantity is supplied.

Try solving on your own before revealing the answer!

Final Answer: C) S1 to S2

A technological advancement shifts the supply curve to the right, from S1 to S2, indicating an increase in supply at every price level.