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There is a new invention that makes hot chocolate in an automatic processor that adds marshmallow whipped cream that is extremely efficient and cost-effective. What happens in the manufacturer's market? What changes: S or Qs?

a) Supply (S) increases
b) Supply (S) decreases
c) Quantity supplied (Qs) increases
d) Quantity supplied (Qs) decreases

1 Answer

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Final answer:

The introduction of an automatic processor that is efficient and cost-effective for making hot chocolate increases the supply of hot chocolate in the market, leading to an increase in supply (S).

Step-by-step explanation:

When a new invention arises that makes the production of a good, such as hot chocolate with marshmallow whipped cream, more efficient and cost-effective, manufacturers are likely to be able to produce the good at a lower cost. This increase in production efficiency typically means manufacturers can expect to earn higher profits at any given price, which leads to an increase in the supply of the good.

Just as in the example where a decrease in the price of steel causes car manufacturers to supply a higher quantity of cars, shifting the supply curve to the right, the introduction of an automatic processor for hot chocolate would increase the quantity supplied in the manufacturer's market. Therefore, the introduction of this technology would result in option (a), where Supply (S) increases.

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