Exhibit 6-3
-To derive a firm's supply curve, we assume that a firm chooses to produce where
A)sales are at a maximum.
B)employment is at a maximum.
C)profits are at a maximum.
D)total revenue is at a maximum.
E)total cost is at a minimum.

Question

Exhibit 6-3 
-To derive a firm's supply curve, we assume that a firm chooses to produce where
A)sales are at a maximum. 
B)employment is at a maximum. 
C)profits are at a maximum. 
D)total revenue is at a maximum. 
E)total cost is at a minimum.

Quizplus · Accepted Answer

A firm's supply curve is derived based on the assumption that it chooses to produce where profits are at a maximum. This means that the firm will produce and supply the quantity of output where the marginal revenue (MR) equals the marginal cost (MC), which results in maximum profit. Therefore, the firm's supply curve will be the portion of its marginal cost curve that lies above the average variable cost (AVC) curve, because the firm will only produce if it can cover its variable costs and earn a profit.

Exhibit 6-3 -To Derive a Firm's Supply Curve, We Assume That a Assume