If one perfectly competitive firm increases its level of output, market supply

The correct answer is: A. Will increase and market price will fall.

In a perfectly competitive market, firms are price-takers, meaning that they have no control over the market price. The market price is determined by the intersection of the market supply and demand curves. If one firm increases its level of output, it will have a negligible effect on the market supply curve. However, it will increase the total quantity supplied in the market, which will cause the market price to fall.

Option B is incorrect because the market price will fall, not rise. Option C is incorrect because both the market supply and market price will change. Option D is incorrect because the market supply will increase, not decrease.