The short-run supply curve for a perfectly competitive firm is the marginal cost curve

A) at all price levels because the firm chooses the profit-maximizing quantity of output where marginal revenue equals marginal cost.
B) above the minimum point of the average variable cost (AVC) curve because as the price falls, the firm maximizes profit by producing more output to account for a smaller profit margin on each unit.
C) above the minimum point of the average variable cost (AVC) curve because the firm maximizes profit by choosing the quantity at which marginal revenue equals marginal cost and below the minimum point of AVC the firm will shut down to minimize its losses.
D) above the minimum point of the average total cost (ATC) curve because the firm maximizes profit by choosing the quantity at which marginal revenue equals marginal cost and below the minimum point of ATC the firm will shut down to minimize its losses.

Question

The short-run supply curve for a perfectly competitive firm is the marginal cost curve
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A) at all price levels because the firm chooses the profit-maximizing quantity of output where marginal revenue equals marginal cost.
B) above the minimum point of the average variable cost (AVC) curve because as the price falls, the firm maximizes profit by producing more output to account for a smaller profit margin on each unit.
C) above the minimum point of the average variable cost (AVC) curve because the firm maximizes profit by choosing the quantity at which marginal revenue equals marginal cost and below the minimum point of AVC the firm will shut down to minimize its losses.
D) above the minimum point of the average total cost (ATC) curve because the firm maximizes profit by choosing the quantity at which marginal revenue equals marginal cost and below the minimum point of ATC the firm will shut down to minimize its losses.

Quizplus · Accepted Answer

The short-run supply curve for a perfectly competitive firm is the portion of the marginal cost curve that is above the minimum point of the average variable cost (AVC) curve. This is because the firm chooses the quantity of output at which marginal revenue equals marginal cost, but below the minimum point of AVC, the firm will shut down to minimize its losses. Therefore, option C is the correct answer.

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