The short-run average total cost curve will shift upward reducing firms’ profits.Correct
The supply curve will shift to the right reducing prices in the market further.
Firms will now make supernormal profits that will attract new entrants to the market.
The average revenue curve will shift upward by the extent of the increase in labour costs.

Explanation
When labour costs increase, the average and marginal costs rise leading to an upward shift of the average total cost curve.