When technology increases the supply of a good and lower prices increase the quantity demanded,
A) the invisible hand is unnecessary.
B) the economy is reallocating resources to achieve an efficient allocation.
C) consumer surplus falls.
D) the economy is no longer efficient because the quantity changes.
E) the marginal benefit of the good increases with the quantity produced.

Question

Quizplus · Accepted Answer

When technology increases supply and lower prices increase the quantity demanded, it means that the market is reallocating resources to achieve an efficient allocation. This is because the increased supply and lower prices indicate that production is becoming more efficient and consumers are willing and able to purchase more of the good at a lower price, which leads to a more optimal allocation of resources. The invisible hand of the market is still necessary to coordinate the actions of buyers and sellers in this process. Consumer surplus may fall initially due to lower prices, but eventually, it will increase as more consumers are able to afford and enjoy the good at the lower price. The marginal benefit of the good may increase with the quantity produced, but this is not a necessary condition for the observed phenomenon.

When Technology Increases the Supply of a Good and Lower