It is usually assumed that a perfectly competitive firm's supply curve is given by its marginal cost curve.In order for this to be true,which of the following additional assumptions are necessary? I.That the firm seek to maximize profits.
II.That the marginal cost curve be positively sloped.
III.That price exceeds average variable cost.
IV.That price exceeds average total cost.
A)All of the above.
B)I and II but not III and IV.
C)I and III but not II and IV.
D)I and II only.
E)I,II and III,but not IV.

Question

Quizplus · Accepted Answer

For a perfectly competitive firm's supply curve to be represented by its marginal cost curve, it is necessary that the firm seeks to maximize profits (I), that the marginal cost curve is positively sloped (II), and that the price exceeds average variable cost (III) to ensure the firm continues production in the short run. The price exceeding average total cost (IV) is not a requirement for the supply curve representation but rather a condition for the firm to make a profit in the long run.

It Is Usually Assumed That a Perfectly Competitive Firm's Supply