What will happen in a perfectly competitive market if there is an increase in the cost of labour, ceteris paribus?
A) Firms will now make supernormal profits that will attract new entrants to the market.
B) The short-run average total cost curve will shift upward reducing firms' profits.
C) The supply curve will shift to the right reducing prices in the market further.
D) The average revenue curve will shift upward by the extent of the increase in labour costs.
Correct Answer:
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A) average
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