Consider the following short- run cost curves for a perfectly competitive firm. FIGURE 9- 2
-Refer to Figure 9- 2. The short- run supply curve for this perfectly competitive firm is its
A) AVC curve at and above $1.50.
B) entire marginal cost curve.
C) ATC curve at and above $3.
D) marginal cost curve at and above $3.
E) marginal cost curve at and above $1.50.

Question

Consider the following short- run cost curves for a perfectly competitive firm.  FIGURE 9- 2
-Refer to Figure 9- 2. The short- run supply curve for this perfectly competitive firm is its
A) AVC curve at and above $1.50. 
B) entire marginal cost curve. 
C) ATC curve at and above $3. 
D) marginal cost curve at and above $3. 
E) marginal cost curve at and above $1.50.

Quizplus · Accepted Answer

In the short-run, a perfectly competitive firm will only produce as long as its price is above its AVC (average variable cost) curve. Therefore, the short-run supply curve for this firm is its AVC curve at and above $1.50. Since its AVC curve intersects its marginal cost curve at $1.50, the firm will only produce at prices above $1.50 where its marginal cost is also above $1.50. Therefore, the correct answer is E, the marginal cost curve at and above $1.50.

Consider the Following Short- Run Cost Curves for a Perfectly