The short-run industry supply curve is found by

Question

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The short-run industry supply curve is found by adding up the quantities supplied at each price by each firm in the industry. This is because in the short-run, firms cannot enter or exit the market, so the industry supply is determined by the quantities supplied by the existing firms. Horizontal summation of the average total cost curve (option B) gives the long-run industry supply curve, while taking the inverse of the industry demand curve (option A) gives the equilibrium price, not the industry supply curve. Option D is incorrect because some firms may continue to produce even if they are making a loss in the short run, as long as they can cover their variable costs.

The Short-Run Industry Supply Curve Is Found by