A perfectly competitive firm's short-run supply curve is its _____ cost curve above its intersection with the firm's _____ cost curve.

Question

Quizplus · Accepted Answer

In the short-run, a perfectly competitive firm's supply curve is determined by its marginal cost curve because the firm will only produce if the price is higher than its variable costs, which are captured by the marginal cost curve. The curve starts at the minimum of the average variable cost curve because at prices lower than that, the firm will shut down and produce zero output. Therefore, the perfectly competitive firm's short-run supply curve is its marginal cost curve above its intersection with the average variable cost curve.

A Perfectly Competitive Firm's Short-Run Supply Curve Is Its _____