A perfectly competitive firm's supply curve in the short run is the rising portion of the marginal cost curve:

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will produce at a quantity where marginal cost equals marginal revenue. If the price is lower than the minimum of the AVC curve, the firm will shut down and produce zero output. If the price is above the minimum of the AVC curve but below the minimum of the ATC curve, the firm will continue to produce in the short run but will operate at a loss. Therefore, the rising portion of the MC curve that corresponds to positive profits will occur for prices above the minimum of the AVC curve, as the firm will only produce if the price is sufficient to cover variable costs and contribute to fixed costs and profits.

A Perfectly Competitive Firm's Supply Curve in the Short Run