Which of the following segments of the marginal cost curve lies entirely on the firm’s short-run supply curve?

Question

BlackTom AI · Accepted Answer

To answer, we need to recall what portion of the marginal cost (MC) curve lies on the firm’s short-run supply curve. The short-run supply curve for a competitive firm is the portion of MC that lies above the minimum point of the average variable cost (AVC) curve. Below that minimum AVC, the firm would shut down, so MC is not part of the supply curve there. Now evaluate each option:

Option RS TU – This would imply the entire segment from R through S to T and U lies on the short-run supply. However, the portion of MC from R to S (and possibly beyond) includes regions that are below the AVC minimum, so that portion cannot be on the supply curve. Therefore, RS TU is not correct.

Option RS – If we take RS, this covers only the early left portion of the MC curve, which includes the range where MC is below or at the AVC minimum. Since supply consists only of MC above the AVC minimum, RS cannot lie entirely on the supply curve. So RS is incorrect.

Option STU – The STU segment corresponds to MC around and near the AVC minimum and rising region. Yet, to be entirely on the supply curve, every point from S to U would need to be above the AVC minimum. Depending on the graph, the portion from S to T may still include regions at or near the AVC minimum where MC is not part of the supply, making this option suspect.

Option TUV – This segment runs from T up through U to V along MC in the region above the AVC minimum, i.e., where MC is interpreted as the short-run supply. This matches the definition: MC above the shutdown point (minimum AVC) constitutes the firm’s short-run supply. Therefore, TUV lies entirely on the short-run supply curve.

Option RSTU – This would cover a broad left-to-mid portion of MC, including regions that dip below the AVC minimum. Because portions of RSTU fall where MC is not part of the supply curve, this option cannot be correct.

In summary, among the given segments, the only one that lies entirely on the firm’s short-run supply curve is the portion where MC is above the AVC shutdown point, which corresponds to the TUV segment.

AP Economics-Hillebrand AP Microeconomics Sem 1 Exam 2025 - Requires Respondus LockDown Browser

Which of the following segments of the marginal cost curve lies entirely on the firm’s short-run supply curve?

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