The short-run supply curve for a purely competitive industry can be found by
A)multiplying the AVC curve of the representative firm by the number of firms in the industry.
B)adding horizontally the AVC curves of all firms.
C)summing horizontally the segments of the MC curves lying above the AVC curve for all firms.
D)adding horizontally the immediate market period supply curves of each firm.

Question

Quizplus · Accepted Answer

The short-run supply curve for a purely competitive industry is derived by summing horizontally the segments of the marginal cost (MC) curves of all firms that lie above the average variable cost (AVC) curve. This is because firms will only supply output in the short run if the price covers their average variable costs, and the MC curve above AVC represents the additional cost of producing one more unit, which sets the supply behavior.

The Short-Run Supply Curve for a Purely Competitive Industry Can