The competitive firm's long-run supply curve

Question

Quizplus · Accepted Answer

In the long run, a competitive firm will produce where price equals long-run marginal cost, and will earn zero economic profit. The long-run supply curve of the firm is the portion of the long-run marginal cost curve that lies above the minimum point of the long-run average cost curve. Therefore, choice B is correct. Choice A is incorrect because the long-run supply curve is not always horizontal, as it depends on the shape of the long-run marginal cost and average cost curves. Choice C is incorrect because the long-run supply curve includes both the upward-sloping and horizontal portions of the long-run marginal cost curve. Choice D is incorrect because while the long-run average cost curve may intersect the long-run marginal cost curve at the minimum point, only the portion above this point is included in the long-run supply curve.

The Competitive Firm's Long-Run Supply Curve