Suppose over the next several years the productivity of firms producing electric cars improves dramatically.The advance in productivity leads to
A) a decrease in the supply of electric cars so that the supply curve shifts leftward.
B) a decrease in the supply of electric cars so that the supply curve shifts rightward.
C) an increase in the supply of electric cars so that the supply curve shifts leftward.
D) an increase in the supply electric cars so that the supply curve shifts rightward.
E) no change in the supply of electric cars, only a change in the quantity supplied of electric cars.

Question

Quizplus · Accepted Answer

A dramatic improvement in productivity for firms producing electric cars means they can produce the same amount of cars at a lower cost, resulting in a lower price to consumers. This in turn encourages firms to produce more electric cars, leading to an increase in the supply of electric cars. As a result, the supply curve shifts rightward.

Suppose Over the Next Several Years the Productivity of Firms