Question

Which of the following would shift the supply curve from S to S2?

a) A tax cut for the producers
b) Several producers go out of business
c) Subsidies get cut
d) Factories get destroyed during a bad storm

Answer 1

Damage to factories from a storm increases production costs and decreases production capacity, shifting the supply curve to the left, indicating a lower quantity supplied at each price. Therefore, the most appropriate option is D.

Step-by-step explanation:

Among the given options, scenario d) Factories get destroyed during a bad storm would shift the supply curve from S1 to S2. When factories are damaged, the physical capacity of firms to produce goods is reduced, which can be seen as an increase in the cost of production. As a result of this destruction, the supply curve shifts to the left, indicating that at each price, the quantity supplied by producers decreases compared to what it was before the storm damaged the factories.