Final answer:
A price increase in pizza cheese, an input cost, would result in an upward shift of the marginal cost curve, leading Ronny's Pizza House to decrease its output to maintain profit maximization.
Step-by-step explanation:
If Ronny's Pizza House operates in a perfectly competitive market and the price of pizza cheese increases, ceteris paribus, the expected impact on Ronny's profit-maximizing output decision would be A. Output decreases because the marginal cost curve shifts upward. This happens because the higher cost of cheese increases the production costs for Ronny's Pizza House, which in turn raises the marginal cost of making each pizza. In a perfectly competitive market, firms are price takers and cannot simply raise the price of their pizzas to cover increased costs. Instead, they have to adapt to the market price while managing their costs. When the marginal cost rises, the firm will find that at each quantity, the cost of producing one more pizza (the marginal pizza) is now higher than before. Thus, to maximize profits, the firm will reduce its output to the point where marginal revenue equals the new higher marginal cost.