Question

Expectations of future profit can increase supply in the following ways:

A. Firms are more likely to produce and supply more of a good or service if they anticipate higher future prices and profits.
B. Increased expectations of future demand can lead to higher production and supply to meet that anticipated demand.
C. Improved technology or cost-saving innovations can boost production and supply when firms anticipate greater profits.
D. Positive expectations about the overall economy can encourage businesses to expand and produce more

Answer 1

Expectations of future profit influence firms to increase supply through mechanisms such as anticipating higher future prices, increased future demand, advancements in technology, and positive economic outlooks, all leading to a rightward shift in the supply curve.

Step-by-step explanation:

The question addresses how expectations of future profit can increase supply. There are several mechanisms by which this occurs:

• Firms are likely to increase production if they anticipate higher future prices and profits, hence supplying more.
• An anticipation of increased future demand can prompt firms to increase their supply in preparation for this demand.
• Technology and cost-saving innovations that are expected to increase profits can also encourage firms to enhance production.
• Positive economic forecasts can lead businesses to expand their operations and increase their supply of goods and services.

In all these cases, if a firm's profits are expected to rise due to any of these factors, the firm is likely to increase its quantity supplied of products or services. This is represented in economic graphs as a shift of the supply curve to the right.