As average costs increase, the MC curve also moves to the left. Thus, the market supply curve begins to shift to the left. This will eventually result in an increase in market prices as firms cut back on production or leave the industry due losses.

Static analysis can provide insights about the direction prices will change but it does not tell you about the dynamics of the market changes. It does not address questions about how firms survive when they are losing money. Nor does it tell you how stocks of products (inventories) are used by firms to deal with demand and cost changes.

In reality, firms make far more use of cash flow analysis, then they do of static marginal cost analysis.