The long-run supply curve of an individual firm in perfect competition is the same thing as:
A)the rising segment of its marginal cost curve, above average cost.
B)the rising segment of its average cost curve.
C)its entire average cost curve.
D)that entire part of its total cost curve in which total cost rises or remains constant as output increases.
E)none of the above.

Question

Quizplus · Accepted Answer

In the long run, all firms in perfect competition must earn zero economic profit. Therefore, the firm's long-run supply curve is determined by the point at which its marginal cost curve (which shows the additional cost of producing each additional unit) intersects with its average cost curve (which shows the average cost per unit produced). The rising segment of the firm's marginal cost curve above the average cost is where the firm will begin to produce additional units when demand increases, and thus represents its long-run supply curve.

The Long-Run Supply Curve of an Individual Firm in Perfect