-The short-run supply curve for a perfectly competitive industry can be found by:
A)multiplying the AVC curve of the representative business at each output level by the number of businesses in the industry
B)adding horizontally the AVC curves of all businesses in the industry
C)summing horizontally the segments of the MC curves lying above the AVC curves for all businesses in the industry
D)adding horizontally the AC curves of all the businesses in the industry
E)adding vertically the AC curves of all the businesses in the industry

Question

-The short-run supply curve for a perfectly competitive industry can be found by:
A)multiplying the AVC curve of the representative business at each output level by the number of businesses in the industry 
B)adding horizontally the AVC curves of all businesses in the industry 
C)summing horizontally the segments of the MC curves lying above the AVC curves for all businesses in the industry 
D)adding horizontally the AC curves of all the businesses in the industry 
E)adding vertically the AC curves of all the businesses in the industry

Quizplus · Accepted Answer

The short-run supply curve for a perfectly competitive industry is derived by horizontally summing the marginal cost (MC) curves of all firms in the industry, but only for the portions of the MC curves that lie above the average variable cost (AVC). This is because firms will only supply output when the price covers their AVC, making this portion of the MC curve relevant for supply decisions.

-The Short-Run Supply Curve for a Perfectly Competitive Industry Can