The short-run supply curve for a perfectly competitive industry is:
A)downward sloping because of the law of diminishing marginal returns.
B)derived by summing the individual firms' marginal cost curves horizontally.
C)perfectly elastic in the case of homogeneous products.
D)the negatively sloped portion of the marginal cost curve.

Question

Quizplus · Accepted Answer

In a perfectly competitive industry, each firm is a price taker and produces at a level where marginal cost equals price. Therefore, the short-run supply curve for the industry can be derived by summing the individual firms' marginal cost curves horizontally, since each firm's marginal cost curve represents its willingness to produce at different price levels. The resulting supply curve is upward sloping, as higher prices will incentivize firms to produce more.

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