Final answer:
Moving along the marginal cost curve typically involves an increase in marginal cost as output increases, due to the law of diminishing returns, and is depicted as an upward-sloping curve. An increase in demand leads to a movement up the marginal cost curve and results in higher prices and profits. If marginal costs increase, the firm's supply curve shifts leftwards, indicating reduced supply at each price point.
Step-by-step explanation:
When discussing the movement along a marginal cost curve in the context of economic principles, neither of the initial options provided by the student is correct. Instead, as a firm's output increases, the marginal cost typically increases due to the law of diminishing returns. This means that, ceteris paribus, the more a firm produces, the higher the cost of producing each additional unit becomes. Therefore, if we graph marginal cost, the curve will generally be upward sloping, indicating that marginal cost increases as the quantity produced increases.
Moreover, the student's question about the relationship between marginal cost and opportunity cost of producing one more unit is not directly answered by either option. As production increases, what the firm foregoes in terms of alternate production options (opportunity cost) may change. However, this change is not typically represented in the marginal cost curve itself. Opportunity cost needs to be considered separately from the marginal cost curve, which specifically relates to the cost of producing one more unit.
In the context of an increase in demand and a rightward shift in the demand curve and marginal revenue, a business would move up the marginal cost curve as it increases output to meet the higher demand. This movement results in a new equilibrium with a higher price and potentially higher average costs, but the increase in the price will outpace the increase in costs, leading to increased total profits.
If marginal costs increase, the firm's individual supply curve will shift leftwards. This shift means the firm will supply less at each price point compared to before the increase in marginal costs.