Supply Curve Shifts Due to Input Costs

Steps:

• Identify that supply shifts leftward from S1 to S2, indicating decreased supply at each price.
• Recall supply shifters: changes in input costs, technology, number of sellers, or expectations.
• Evaluate options: focus on cost-related factors that raise production expenses.
• Determine D increases costs, causing leftward shift; others lower costs or expand capacity.

Why D is correct:

• Higher wage rates increase variable input costs, reducing quantity supplied at each price per the law of supply.

Why the others are wrong:

• A: More firms expand total production capacity, shifting supply rightward.
• B: More workers lower production costs or increase output, shifting supply rightward.
• C: Higher productivity reduces costs per unit, shifting supply rightward.

Final answer: D