In the short run, the individual competitive firm's supply curve is that segment of the
A) average variable cost curve lying below the marginal cost curve.
B) marginal cost curve lying above the average variable cost curve.
C) marginal revenue curve lying below the demand curve.
D) marginal cost curve lying between the average total cost and average variable cost curves.

Question

Quizplus · Accepted Answer

In the short run, a competitive firm will produce at the level of output where marginal cost equals marginal revenue, as long as that level of output covers its average variable cost. This means that the firm will produce as long as the price it receives for its output is greater than its average variable cost. Therefore, the firm's supply curve is the segment of the marginal cost curve lying above the average variable cost curve.

In the Short Run, the Individual Competitive Firm's Supply Curve