The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

-When the marginal costs of firms in perfect competition increases, the short-run supply curve of the industry will shift to the left.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-When the marginal costs of firms in perfect competition increases, the short-run supply curve of the industry will shift to the left.

Quizplus · Accepted Answer

When the marginal costs of firms in perfect competition increase, it leads to a decrease in profits, and some firms may exit the market in the short run. This reduces the number of firms in the industry, leading to a decrease in the quantity supplied at each price level. As a result, the short-run supply curve shifts to the left.

The Figure Given Below Shows the Aggregate Demand and Supply