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 margnal cost curve be positively sloped.
III.That price exceed average variable cost.
IV.That price exceed 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

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 margnal cost curve be positively sloped.
III.That price exceed average variable cost.
IV.That price exceed 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.

Quizplus · Accepted Answer

For a perfectly competitive firm's supply curve to be its marginal cost curve, the firm must seek to maximize profits (I), the marginal cost curve should be positively sloped (II), and the price must exceed average variable cost (III) to ensure the firm covers its variable costs and continues production in the short run. It is not necessary for the price to exceed average total cost (IV) for the supply curve to be the marginal cost curve.

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