If the cost of production rises for all the firms in a perfectly competitive industry, which of the following statements would likely occur? A) The total profit increases

Economics Dec 13, 2020

If the cost of production rises for all the firms in a perfectly competitive industry, which of the following statements would likely occur?

A) The total profit increases.

B) The total revenue increases.

C) The marginal cost curve shifts downward.

D) Each firm will supply less output at any given price.

Expert Solution

If the cost of production rises for all the firms in a perfectly competitive industry, then (D) Each firm will supply less output at any given price.

When a good becomes more expensive to produce, the cost of each unit (as measured by the marginal cost) will increase. This will result in a decrease in supply, which is shown by a leftward shift to the curve.

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