Figure 8.5.1
-The supply curve for a competitive firm is
A) its entire MC curve.
B) the upward-sloping portion of its MC curve.
C) its MC curve above the minimum point of the AVC curve.
D) its MC curve above the minimum point of the ATC curve.
E) its MR curve.

Question

Figure 8.5.1
-The supply curve for a competitive firm is
A) its entire MC curve. 
B) the upward-sloping portion of its MC curve. 
C) its MC curve above the minimum point of the AVC curve. 
D) its MC curve above the minimum point of the ATC curve. 
E) its MR curve.

Quizplus · Accepted Answer

The supply curve for a competitive firm is determined by its marginal cost (MC) curve above the minimum point of its average variable cost (AVC) curve. This is because a firm will only produce if it can cover its variable costs and any additional revenue will go towards covering fixed costs and generating profits. Therefore, options A and D are incorrect because they both include the entire MC curve or the MC curve above the minimum point of the average total cost (ATC) curve, which would result in the firm producing even if it is incurring losses. Option B is also incorrect because the upward-sloping portion of the MC curve may be below the minimum point of the AVC curve, in which case the firm would not produce. Option E is also incorrect because the MR curve is not sufficient to determine the level of output a competitive firm will produce.

Figure 8.5.1 -The Supply Curve for a Competitive Firm Is