A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

Question

Quizplus · Accepted Answer

In perfect competition, a firm is a price taker and must accept the market price for its product. Therefore, the firm will produce at the quantity where P = MC. The supply curve of the firm is the portion of the MC curve that is above the AVC curve, since the firm will only produce if the price is above its variable costs. Therefore, the correct answer is B, the average variable cost curve.

A Perfectly Competitive Firm's Supply Curve Follows the Upward-Sloping Segment