A perfectly competitive firm's supply curve is the upward-sloping portion of the marginal cost curve. What does this lie above?

Question

Quizplus · Accepted Answer

The upward-sloping portion of the marginal cost curve lies above the average variable cost. This is because in perfect competition, firms will produce only if they can cover their variable costs, and the marginal cost is the cost of producing one more unit, which includes variable costs. Therefore, the supply curve must lie above the average variable cost to ensure that the firm is able to at least cover its variable costs when producing each unit.

A Perfectly Competitive Firm's Supply Curve Is the Upward-Sloping Portion