The short-run supply curve for the perfectly competitive firm is the portion of its

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In the short run, a perfect competitive firm will only continue to produce as long as it covers its variable costs. Therefore, the short-run supply curve for the perfectly competitive firm is the portion of its marginal cost (MC) curve above the average variable cost (AVC) curve. This is because, in the short run, the firm cannot change its fixed costs (FC), which are already sunk, but it can change its variable costs (VC) to adjust to changes in demand. Thus, the firm will continue to produce as long as price covers its variable costs (MC > AVC).

The Short-Run Supply Curve for the Perfectly Competitive Firm Is