The invention of machinery that can double the amount of gold extracted from raw ore will likely:
A)raise the world price of gold to pay for the new machinery.
B)lower the world price of gold because any given amount can now be produced more cheaply.
C)raise the world price of gold because miners' wages must double as their productivity doubles.
D)lower the world price of gold only if new mining companies are not allowed to enter the industry.

Question

The invention of machinery that can double the amount of gold extracted from raw ore will likely:
A)​raise the world price of gold to pay for the new machinery.
B)​lower the world price of gold because any given amount can now be produced more cheaply.
C)​raise the world price of gold because miners' wages must double as their productivity doubles.
D)​lower the world price of gold only if new mining companies are not allowed to enter the industry.

Quizplus · Accepted Answer

The invention of machinery that can double the amount of gold extracted from raw ore will increase the supply of gold in the market, leading to a decrease in the price of gold due to a shift in the supply curve to the right. As the production costs are lower, more gold can be supplied at a lower price. This is a typical case of an increase in productivity leading to a decrease in price in the market.

The Invention of Machinery That Can Double the Amount of Gold