Which of the following statement (s) is/are correct?

Statement 1: A market supply curve is derived for a fixed number of firms in the market. As the number of firms changes, the market supply curve shifts as well.

Statement 2: if the number of firms in the market increases (decreases), the market supply curve shifts to the left (right).

Only Statement 1 is correct.

The correct answer is option 1: Only Statement 1 is correct.

Statement 1: Correct

• The market supply curve is derived by summing up the individual supply curves of all firms for a given number of firms in the market.
• If the number of firms changes, the market supply curve shifts:
  • If new firms enter, supply increases → rightward shift.
  • If firms exit, supply decreases → leftward shift.

Statement 2: Incorrect

• The direction of the shift is wrong:
  • An increase in the number of firms increases total market supply, shifting the curve to the right (not left).
  • A decrease in the number of firms reduces total market supply, shifting the curve to the left (not right).
• The statement incorrectly reverses the direction of the shift.