Question

multiple choice question
what will happen to a firm that finds a way to lower production costs through better technology or improved organization?
o it will fail to compete and will be forced out of the industry.
o its profits will increase.
o its demand curve will shift left.
o it will experience economic losses.

Explanation:

Profit is calculated as total revenue minus total cost. When a firm lowers production costs through better technology or improved organization, assuming revenue remains the same or changes favorably, profit will increase. Lower costs mean more money left over as profit. A firm with lower costs is more competitive, not less, so it won't be forced out of the industry. The demand curve is related to consumer - side factors like preferences, income, etc., not directly to a firm's cost - cutting measures. And cost - cutting generally does not lead to economic losses.

Answer:

Its profits will increase.