A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

Question

Quizplus · Accepted Answer

A perfectly competitive firm in the short-run will produce where marginal cost equals marginal revenue, as long as price is above the average variable cost curve. This is because the firm wants to cover its variable costs and any remaining revenue goes towards covering fixed costs and generating profit. So, the point where marginal cost intersects with the supply curve (which is the portion of the marginal cost curve above the average variable cost curve) is the firm's short-run supply curve. Thus, option B is the correct answer.

A Perfectly Competitive Firm's Marginal Cost Curve Above the Average