Final answer:
Increasing marginal cost leads to higher production cost per unit. The firm, striving for optimal profit, would reduce production until the cost to produce each unit equals the revenue it generates, causing the net marginal revenue curve to shift downward and wool suit production to decrease.
Step-by-step explanation:
When the marginal cost of assembling the men's suits increases, it essentially means the additional cost to produce one more unit (suit) is higher. According to the rules of marginal analysis in microeconomics, a firm maximizes profit when the marginal revenue (MR) equals marginal cost (MC).
If marginal cost increases and hypothetically assuming marginal revenue stays constant, the firm's production cost per unit increases. If the firm continues to produce at the same quantity as before, it ends up making less profit or even losses as the additional cost to produce a unit outweighs the revenue it brings in.
So, to maintain profitability, the optimal action for such a firm would be to reduce the quantity of output until marginal cost equals marginal revenue again. Therefore, the correct answer to your question is D) The net marginal revenue (NMR) curve for wool fabric shifts downward, and wool (suit) production decreases.
Learn more about marginal cost and marginal revenue