The perfectly competitive firm’s short-run supply curve is the region of the firm’s marginal cost curve above the minimum point on the average variable cost curve.

Here's why:

1. In the short run, a firm will continue to produce as long as it is covering its average variable costs. This is because fixed costs have to be paid regardless of whether the firm produces or not, so the firm will produce as long as the price covers the variable costs.

2. The firm's supply decision in the short run is therefore determined by its marginal cost (the cost of producing an additional unit) and its average variable cost (the average cost of producing each unit, not including fixed costs).

3. The firm will increase production (i.e., move up along its marginal cost curve) as long as the price (which equals marginal revenue in perfect competition) is above the minimum point on the average variable cost curve. This is because the firm is covering all its variable costs and contributing something towards its fixed costs.

4. Therefore, the region of the firm’s marginal cost curve above the minimum point on the average variable cost curve is the firm's short-run supply curve.

Question

The perfectly competitive firm’s short-run supply curve is the region of the firm’s marginal cost curve above the minimum point on the average variable cost curve.

Here's why:

1. In the short run, a firm will continue to produce as long as it is covering its average variable costs. This is because fixed costs have to be paid regardless of whether the firm produces or not, so the firm will produce as long as the price covers the variable costs.

2. The firm's supply decision in the short run is therefore determined by its marginal cost (the cost of producing an additional unit) and its average variable cost (the average cost of producing each unit, not including fixed costs).

3. The firm will increase production (i.e., move up along its marginal cost curve) as long as the price (which equals marginal revenue in perfect competition) is above the minimum point on the average variable cost curve. This is because the firm is covering all its variable costs and contributing something towards its fixed costs.

4. Therefore, the region of the firm’s marginal cost curve above the minimum point on the average variable cost curve is the firm's short-run supply curve.

Knowee AI · Accepted Answer

The perfectly competitive firm’s short-run supply curve is the region of the firm’s marginal cost curve above the minimum point on the average variable cost curve.

Here's why:

1. In the short run, a firm will continue to produce as long as it is covering its average variable costs. This is because fixed costs have to be paid regardless of whether the firm produces or not, so the firm will produce as long as the price covers the variable costs.

2. The firm's supply decision in the short run is therefore determined by its marginal cost (the cost of producing an additional unit) and its average variable cost (the average cost of producing each unit, not including fixed costs).

3. The firm will increase production (i.e., move up along its marginal cost curve) as long as the price (which equals marginal revenue in perfect competition) is above the minimum point on the average variable cost curve. This is because the firm is covering all its variable costs and contributing something towards its fixed costs.

4. Therefore, the region of the firm’s marginal cost curve above the minimum point on the average variable cost curve is the firm's short-run supply curve.

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