The correct answer is: D. increasing marginal cost

For a competitive firm, the supply curve is the upward sloping part of the marginal cost curve that lies above the short-run average variable cost curve. Competitive firms maximize their profits by producing at the point where the market price is equal to their marginal cost of production.

Since the marginal cost curve for a competitive firm is upward sloping, the firm will produce along the upward sloping marginal cost curve. When the price increases, the firm will increase its production and as the price decreases, the firm will increase its production.