Read the following statements - Assertion (A) and Reason (R):
Assertion: There is an upward shift of the MC curve after a technological innovation.
Reasoning: To produce a given level of output, the organizational innovation allows the firm to use fewer units of inputs.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: Assertion (A) is false but Reason (R) is true.
Assertion: There is an upward shift of the MC curve after a technological innovation. False.
- Technological innovation improves efficiency, allowing firms to produce the same output with fewer inputs.
- This lowers marginal cost (MC) because the firm incurs less cost per additional unit produced.
- Thus, instead of shifting upward, the MC curve shifts downward (rightward) after technological improvement.
Reasoning: To produce a given level of output, the organizational innovation allows the firm to use fewer units of inputs. True. Innovation improves production efficiency, meaning firms require fewer inputs to produce the same amount of output. This reduces production costs, which aligns with economic principles.