A firm's marginal cost curve above the minimum of the average variable cost curve is also

Question

Quizplus · Accepted Answer

The marginal cost curve above the minimum of the average variable cost curve represents the additional cost incurred to produce one more unit of output in the short run. This additional cost is what the firm takes into consideration while deciding the quantity of output to produce. Hence, the short-run supply curve of the firm is determined by the portion of the marginal cost curve above the minimum of the average variable cost curve. Therefore, the correct answer is C. The remaining options are incorrect as the marginal cost curve does not represent the demand curve or the producer surplus curve or the market supply curve.

A Firm's Marginal Cost Curve Above the Minimum of the Average