When an industry's raw material costs increase, other things remaining the same,
A) the supply curve shifts to the left.
B) the supply curve shifts to the right.
C) output increases regardless of the market price and the supply curve shifts upward.
D) output decreases and the market price also decreases.

Question

Quizplus · Accepted Answer

An increase in raw material costs raises the cost of production, making it more expensive for firms to produce the same quantity of goods. As a result, firms are willing to supply less at each price point, leading to a leftward shift in the supply curve.

When an Industry's Raw Material Costs Increase, Other Things Remaining