The figure below shows the aggregate demand and supply curves for the U.S. A rightward shift of the aggregate supply curve from AS to AS' would be caused by:

A) an increase in resource prices, improved technology, or an extension of patent protection.
B) a decrease in resource prices, improved technology, or an extension of patent protection.
C) a decrease in resource prices, improved technology, or a shortening of patent protection.
D) an appreciation of the dollar, higher inflation in Europe, or a decrease in resource prices.
E) a depreciation of the dollar, higher inflation in Asia, or improved technology.

Question

The figure below shows the aggregate demand and supply curves for the U.S. A rightward shift of the aggregate supply curve from AS to AS' would be caused by:

A) an increase in resource prices, improved technology, or an extension of patent protection. 
B) a decrease in resource prices, improved technology, or an extension of patent protection. 
C) a decrease in resource prices, improved technology, or a shortening of patent protection. 
D) an appreciation of the dollar, higher inflation in Europe, or a decrease in resource prices. 
E) a depreciation of the dollar, higher inflation in Asia, or improved technology.

Quizplus · Accepted Answer

A rightward shift in the aggregate supply curve indicates an increase in the quantity of goods and services supplied at every price level. This could be caused by a decrease in resource prices, which would reduce the cost of production and increase profits, encouraging producers to supply more. Improved technology would also reduce the cost of production and increase productivity, leading to an increase in supply at every price level. An extension of patent protection would allow producers to earn higher profits, incentivizing them to increase production. Therefore, choices A and B are both possible, but B is the better choice as it includes all the options listed in A and excludes the incorrect option of a shortening of patent protection.

The Figure Below Shows the Aggregate Demand and Supply Curves