Final answer:
The supply curve of a good or service is the same as the marginal cost curve above the average variable cost and reflects the quantity a firm is willing to supply based on the market price. If marginal costs increase, the supply curve shifts upwards, indicating the firm will supply less at any given price level.
Step-by-step explanation:
The supply curve of a good or service is the same as the marginal cost curve above the average variable cost. When a firm receives a price from the market, it will supply the amount of output where the price equals its marginal cost, as long as the price is above the minimum average variable cost. Thus, this part of the marginal cost curve becomes the firm's individual supply curve. If marginal costs increase, the firm's individual supply curve shifts upwards. This shift indicates that at any given price level, the firm is willing to supply less quantity of goods than before because it is now more costly to produce additional units.
Under the ceteris paribus assumption, which holds other relevant economic factors constant, a demand or supply curve represents the relationship between two variables - quantity and price. Therefore, if marginal costs increase for reasons not related to a change in price, such as an increase in input prices or changes in technology, the supply curve would still shift due to the change in cost conditions.