The prices of raw materials increase in a purely competitive industry. This change will result in a(n)
A)decrease (downward shift)in the average total cost curve for firms in the industry.
B)decrease (downward shift)in the marginal revenue curve for firms in the industry.
C)increase (upward shift)in the marginal cost curve for firms in the industry.
D)increase (rightward shift)in the short-run supply curve for firms in the industry.

Question

Quizplus · Accepted Answer

An increase in the prices of raw materials will increase the costs of production for firms, leading to an upward shift in the marginal cost curve. This is because the marginal cost curve reflects the cost of producing one more unit of a good, and if raw materials are more expensive, then the cost of producing additional units will also increase.

The Prices of Raw Materials Increase in a Purely Competitive