Final answer:
The recording of Daily Kneads, Inc.'s R&D expenditure will result in a decrease in both assets and stockholders' equity. Technological improvements and changes in input costs influence firm decisions and market supply curves.
Step-by-step explanation:
The entry to record the $400,000 expenditure for researching and developing new production processes at Daily Kneads, Inc. will cause both assets to decrease and stockholders' equity to decrease. This is because the expenditure on research and development is likely to be recorded as an expense, thus reducing the company's assets (cash or equivalent) and simultaneously reducing the stockholders' equity through a reduction in retained earnings due to the recognition of an expense.
Firms are impacted by various external conditions like changes in wage rates or technology. For example, when a technological improvement occurs, it can lead to a reduction in the costs of production, resulting in an increase in supply curves. This can temporarily lead to higher profits which attracts new firms to the market until the market supply adjusts so that profits go back to zero. Conversely, if wages increase, the costs of production also increase which might cause some firms to shut down, leading to a shift in the supply curve to the left and higher market prices.If one input becomes relatively more expensive, firms may adopt a production technology that uses less of the expensive input and more of a cheaper input. This decision is based on comparing the different combinations of inputs to determine the most cost-effective way to produce goods. An increase in wages, for instance, might lead firms to use more physical capital and less labor to maintain or improve labor productivity.