Question

Which of the following curves resembles supply curve under perfect competition in the short run? options average cost curve above break even point marginal cost curve above shut down point marginal utility curve average utility curve

Answer 1

In the short run firms cannot exit the market. With a perfectly competitive market, each firm has to take the price as given and can sell as much as it wants at the given price, i.e. MR=P. Each firm maximizes profits by producing the quantity where its marginal revenue equals its marginal cost, i.e. MR=MC=P. Therefore the marginal cost curve is the short run supply curve of the firm.