The supply curve of the firm in perfect competition is the rising portion of the MC curve above the minimum point on the AVC curve.

Question

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In perfect competition, the firm is a price taker and therefore the marginal revenue (MR) is equal to the market price. The firm will produce at the level of output where MR equals marginal cost (MC) as long as this output is greater than or equal to the minimum point on the average variable cost (AVC) curve. This is because if the output is below the minimum point on the AVC curve, the firm would be better off shutting down and incurring a loss equal to the fixed costs. Therefore, the supply curve of the firm in perfect competition is the rising portion of the MC curve above the minimum point on the AVC curve.

The Supply Curve of the Firm in Perfect Competition Is