In a competitive market, if a company experiences an increase in marginal costs due to rising variable costs, how will this affect its marginal revenue and overall profit if fixed costs remain unchanged?

In a competitive market, when a company faces an increase in marginal costs, this means it costs more to produce each additional unit of its product. Since companies aim to maximize profit, they will compare marginal costs to marginal revenue, which is the extra money earned from selling one more unit. If the marginal costs rise and exceed the marginal revenue, the company may decide to produce less, as making more would lead to losses. For example, if it costs $10 to produce one more toy but selling it only brings in $8, the company will lose money on that toy. Overall, while fixed costs don't change, the increase in marginal costs can lead to lower profits or even losses if the company continues to produce at the same level.