Map Sapling Learning The economy depicted below is competitive in both input and

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Map Sapling Learning The economy depicted below is competitive in both input and output markets, and there are no market failures. The market for widgets is shown in the top graph. The production possibilities frontier for the economy is on the bottom, with gizmos as the only other good produced. Consumers develop a stronger interest in consumina widaets, ceteris paribus. What will occur after this change in consumer preferences? Choose one answer from each multiple choice set. The price of widgets will rise above $4 and the quantity will rise above 6 million. O Producers will be unable to satisfy the higher demand for widgets. O Because the supply of gizmos will fall, the price of gizmos will rise. The price of widgets will rise above $6 and the quantity will rise above 4 million. 10 Millions of Widgets 10 O Resources will be reallocated from widget to gizmo production Production Possibilities Frontier There will be a shift in the production possibilities frontier to enable producers to increase the output of widgets. Since the production possibilities frontier has not changed, no reallocation of resources can be made. O Resources will be reallocated from gizmo to widget production. Previous Give Up & View Solution Check Answer Next Exit Hint

Explanation / Answer

In top chart question, the answer is - the price of widgets will rise above $6 and the quantity will rise above 4 mn as the equlibrium will shift upward. there will be more demand of widgets ans as a result price will go up.

In bottom chart question the answer is- There will be a shift in production possibilities frontier to enable producers to inrease the output of widgets. The supply will be more to cater the demand.

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