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Question

If a firm's cost of raw material decreases then _________.

A
marginal cost curve will shift downward
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B
marginal cost curve will shift upward
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C
market price will go down
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D
market price will go up
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Solution

The correct option is A marginal cost curve will shift downward
The marginal costs are directly linked with variable costs thus if the variable costs, such as raw materials, falls the marginal cost is likely to fall as well and thus the MC curve will shift downwards.

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