Final answer:
An increase in a manufacturing firm's gross profit is likely due to reduced production costs, leading to higher profit margins and incentivizing higher output levels, represented by a rightward shift in the supply curve.
Step-by-step explanation:
Explaining Increased Gross Profit for a Manufacturing Firm
When a manufacturing firm experiences a substantial increase in gross profit compared to the previous year, this could be primarily attributed to a decrease in the costs of production. Lower production costs enhance profit margins, provided that the sales prices remain steady. With higher profits, firms are incentivized to produce more, since additional production translates to increased profitability. This situation is illustrated by a rightward shift of the supply curve, indicating that the firm is willing to supply a larger quantity of goods at any given price.
It is critical to consider the motivation for firms, which is to maximize profits, the difference between revenues and costs. If a firm can reduce its input costs—those associated with labor, materials, and machinery—without affecting the selling prices of its goods or services, its profits will rise. Consequently, the firm is likely to boost production to take advantage of the improved profit scenario, which ultimately increases the supply of its products to the market.