In a perfectly competitive market, a firm's short-run supply curve is

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In a perfectly competitive market, the firm's short-run supply curve is its marginal cost curve above the point of intersection with its average variable cost curve. This is because in the short-run, the fixed costs cannot be altered, so they are not considered in the supply decision. The supply decision is based on the variable costs, which are represented by the marginal cost curve. The firm will only produce if the price is equal to or greater than the marginal cost, and will produce at the level where marginal cost equals price. However, if the price is below the point where the marginal cost equals the average variable cost, the firm will shut down rather than produce at a loss.

In a Perfectly Competitive Market, a Firm's Short-Run Supply Curve