How does technological progress affect the supply curve of a firm?
Technological progress, such as an organisational innovation, allows a firm to produce a given level of output using fewer units of inputs. This improvement in efficiency leads to a reduction in the firm’s marginal cost at any given level of output.
Due to this reduction in marginal cost, there is a rightward (or downward) shift of the Marginal Cost (MC) curve. Since the firm’s supply curve is essentially a segment of the MC curve, technological progress causes the supply curve of the firm to shift to the right.
Consequently, at any given market price, the firm is now able to supply more units of output compared to the situation before the technological progress occurred.
Explanation
The answer is derived from Section 4.5.1 'Technological Progress'. The text explains the causal chain: innovation leads to fewer inputs for the same output, which lowers marginal cost. This causes a rightward shift in the MC curve, and since the supply curve is a segment of the MC curve, the supply curve shifts rightward.