The short-run supply curve for a firm in a perfectly competitive market is

Question

BlackTom AI · Accepted Answer

The question asks: 'The short-run supply curve for a firm in a perfectly competitive market is'.

Given information indicates that the correct choice is: 'd. the portion of its marginal cost curve that lies above its average variable cost.'

In perfect competition, a firm is a price taker and profit-maximizes by producing the quantity where marginal cost (MC) equals price, as long as the price covers average variable cost (AVC).

The short-run supply curve of a firm consists of the segments where the firm is willing to supply output at given prices. This corresponds to the upward-sloping portion of the MC curve that lies above the AVC curve. Below AVC, the firm would minimize losses by not producing, since variable costs cannot be covered.

Since no other answer options are provided in the prompt, there is nothing to compare against this statement. However, from standard microeconomic theory, the conventional description of the short-run supply curve for a perfectly competitive firm is indeed the MC curve above AVC, because:
- Price equals marginal cost (P = MC) in profit-maximizing output when producing in the short run, provided P ≥ AVC.
- If P < AVC, the firm shuts down and supplies zero output.
- Therefore, the supply decision is determined by the portion of MC that is above AVC, which is the positively sloped, supply-relevant segment.

This aligns with the typical derivation used in introductory microeconomics to illustrate short-run supply behavior for competitive firms.

The short-run supply curve for a firm in a perfectly competitive market is

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