A firm's short-run supply curve is its marginal cost curve above the shut down point.

Question

Quizplus · Accepted Answer

In the short run, a firm's supply curve is indeed its marginal cost curve above the shut down point. This is because in the short run, a firm's variable costs are not completely adjustable and it has to cover these costs in order to continue operating. Therefore, the price at which a firm is willing to supply a certain quantity of output in the short run is equal to its marginal cost, as long as this is above the shut down point.

A Firm's Short-Run Supply Curve Is Its Marginal Cost Curve