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An improvement in production technology that lowers the unit cost of making a good will, other things constant, cause the supply curve to:
Ashift to the left, decreasing supply
Bshift to the right, increasing supply
Cstay in place with only a movement along it
Dbecome a vertical line at the old output
Answer & Solution
Correct answer: B. shift to the right, increasing supply
1. A change in a non-price determinant shifts the supply curve.
2. Better technology cuts production cost and raises profitability.
3. More is then offered for sale at each price, which is an increase in supply.
4. An increase in supply is a rightward shift.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.1_
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