FIGURE 11-2
-Refer to Figure 11-2.In diagram B,the firm's short-run supply curve is

Question

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In the short run, the supply curve of a firm is determined by its marginal cost (MC) because output can only be increased or decreased by changing variable inputs, which affects marginal cost. Diagram B shows that the firm's short-run supply curve is MC above AVC, as it is the portion of the MC curve that lies above the AVC curve. The firm will only supply output at a price that is greater than or equal to its average variable cost (AVC) to cover its variable costs and some portion of its fixed costs.

FIGURE 11-2 -Refer to Figure 11-2.In Diagram B,the Firm's Short-Run Supply Curve