A country closes several outdated factories and replaces them with modern, efficient ones. How is the LRAS curve likely to be affected?

• A. The LRAS curve becomes horizontal, indicating no change in potential output.
• B. The LRAS curve shifts to the left, indicating a decrease in potential output.
• C. The LRAS curve shifts to the right, indicating an increase in potential output.
• D. The LRAS curve remains unchanged, as physical capital does not affect potential output.

Answer: (C)