Question

Following a technological improvement–for example, an increase in the speed with which robots can attach bolts to cars–what happens to the supply curve?

1) It shifts to the right
2) It shifts to the left
3) It remains unchanged
4) It cannot be determined

Answer 1

An improvement in technology that reduces the cost of production will cause an increase in supply, resulting in a rightward shift in the supply curve.

Step-by-step explanation:

An improvement in technology that reduces the cost of production will cause an increase in supply. This can be shown as a rightward (or downward) shift in the supply curve. With the technological improvement, the existing firms will experience higher profits, attracting more firms into the market. The market supply will increase until profits are driven back to zero.