A competitive firm’s short run supply curve is most closely related to which of the following curves?Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.atotal variable costbmarginal costcmarginal revenuedaverage total cost
Question
A competitive firm’s short run supply curve is most closely related to which of the following curves?Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.atotal variable costbmarginal costcmarginal revenuedaverage total cost
Solution
The short run supply curve of a competitive firm is most closely related to the marginal cost curve.
Here's why:
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In the short run, a firm will choose to produce if the price it receives for its product is greater than or equal to the marginal cost of production.
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The marginal cost curve shows the cost of producing one more unit of a good. In the short run, this cost can vary based on factors like the availability of inputs and the level of production.
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Therefore, the firm's supply decision at any given price level will be determined by the point on the marginal cost curve that corresponds to that price.
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This means that the firm's short run supply curve is essentially the portion of its marginal cost curve that lies above the average variable cost curve.
So, the correct answer is b) marginal cost.
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