Figure 13-1
Suppose that a firm in a competitive market has the following cost curves:
-Refer to Figure 13-1.The firm's short-run supply curve is its marginal cost curve above

Question

Figure 13-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 13-1.The firm's short-run supply curve is its marginal cost curve above

Quizplus · Accepted Answer

In a competitive market, the firm's short-run supply curve is its marginal cost curve above its shutdown point, which is where MC intersects with AVC. In this case, the shutdown point is at $4.50 where MC intersects with AVC. Any price above $4.50 would be sufficient to cover the variable cost and some part of the fixed cost, ensuring the firm's survival in the short run. Therefore, the firm's short-run supply curve is its MC curve above $4.50, which is the answer choice C.

Figure 13-1 Suppose That a Firm in a Competitive Market Has the Has