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Question
Due to installation of a machine with latest technology, the cost of production has decreased. It will lead to ______.
Options
Expansion in supply
Increase in supply
Contraction in supply
Decrease in supply
Solution
Due to installation of a machine with latest technology, the cost of production has decreased. It will lead to increase in supply.
Explanation:
When the cost of production decreases due to the installation of a machine with the latest technology, producers can supply more of the commodity at the same price or offer the same quantity at a lower price. This shift increases supply, so the supply curve shifts to the right.
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