From the following statements about a firm's supply curve, select the correct statements:
(A) Technological progress is expected to shift the supply curve of a firm to the right.
(B) An increase in input prices is expected to shift the supply curve of a firm to the left.
(C) A decrease in input prices is expected to shift the supply curve of a firm to the left.
(D) The imposition of a unit tax shifts the supply curve of a firm to the left.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (D) only
A firm’s supply curve is a part of its marginal cost curve. Marginal cost is the addition to total cost from one more unit of output. Whatever lowers this cost shifts the supply curve to the right. Whatever raises it shifts the curve to the left.
(A) Technological progress is expected to shift the supply curve of a firm to the right. — Correct. The same inputs now produce more output, so marginal cost falls. At any market price the firm supplies more units.
(B) An increase in input prices is expected to shift the supply curve of a firm to the left. — Correct. If the wage rate rises, for example, the cost of production rises. Marginal cost goes up, and the firm supplies less at each price.
(C) A decrease in input prices is expected to shift the supply curve of a firm to the left. — Incorrect. Cheaper inputs lower the cost of production. So the supply curve shifts to the right.
(D) The imposition of a unit tax shifts the supply curve of a firm to the left. — Correct. The firm pays an extra amount on each unit produced, so its average and marginal costs rise at every output.
NCERT (2026-27): “4.5.1 Technological Progress Suppose a firm uses two factors of production – say, capital and labour – to produce a certain good. Subsequent to an organisational innovation by the firm, the same levels of capital and labour now produce more units of output. Put differently, to produce a given level of output, the organisational innovation allows the firm to use fewer units of inputs. It is expected that this will lower the firm’s marginal cost at any level of output; that is, there is a rightward (or downward) shift of the MC curve. As the firm’s supply curve is essentially a segment of the MC curve, technological progress shifts the supply curve of the firm to the right. At any given market price, the firm now supplies more units of output. 4.5.2 Input Prices A change in input prices also affects a firm’s supply curve. If the price of an input (say, the wage rate of labour) increases, the cost of production rises. The consequent increase in the firm’s average cost at any level of output is usually accompanied by an increase in the firm’s marginal cost at any level of output; that is, there is a leftward (or upward) shift of the MC curve. This means that the firm’s supply curve shifts to the left: at any given market price, the firm now supplies fewer units of output. Impact of a unit tax on supply … Notice that the unit tax shifts the firm’s long run supply curve to the left: at any given market price, the firm now supplies fewer units of output. Summary …
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