A perfectly competitive firm's short-run supply curve is the part of its marginal cost curve that is:

Question

Quizplus · Accepted Answer

In perfect competition, a firm will produce where marginal cost equals marginal revenue. When marginal cost is above average variable cost, the firms are generating some contribution to fixed costs. Therefore, the firm will continue to produce in the short run if the price it receives for its product is greater than the average variable cost. Thus, short-run supply curve of a perfectly competitive firm is the upward-sloping portion of the marginal cost curve that lies above the average variable cost. Therefore, choice B is correct. The short-run supply curve is not above average fixed cost (C) or below average fixed cost (D).

A Perfectly Competitive Firm's Short-Run Supply Curve Is the Part