Question

2. In your own words, describe what portion of the marginal cost curve represents a firm’s supply curve. Why? Can the answer please be typed and have references, thank you.

Answer 1

2) UNDER PERFECT COMPETITION IN THE SHORT RUN, MC ABOVE AVC IS THE SUPPLY CURVE. BECAUSE IF AVC IS NOT COVERED IN THE SHORT RUN, THE FIRM WILL SHUT DOWN. IN THE LONG RUN UNDER PERFECT COMPETITION, MC ABOVE LAC IS THE SUPPLY CURVE. IF LAC IS NOT COVERED IN THE LONG RUN THE FIRM WILL SHUT DOWN.

A MONOPOLIST DO NOT HAVE A UNIQUE SUPPLY CURVE. BECAUSE, SAME QUANTITY CAN BE SOLD AT DIFFERENT PRICES AND DIFFERENT QUANTITY CAN BE SOLD AT THE SAME PRICE.

THE MONOPOLISTIC COMETITION DOES NOT GENERALLY EQUATE MC AND PRICE. IT DOES NOT PRODUCE OUTPUT BASED ON MC CURVE.

UNDER OLIGOPOLY, THERE ARE NO UNIQUE SUPPLY CURVE.

                       THUS WE CAN CONCLUDE THAT THERE IS SPECIFIC SUPPLY CURVE BASED ON MARGINAL COST CURVE (MC) ONLY UNDER PERFECT COMPETITION. UNDER IMPERFECT COMPETITION , THERE IS NO SUCH SPECIFIC SUPPLY CURVE BASED ON MC.

MODERN MICEO ECONOMICS BY A.KOUTSOYIANNIS IS ONE OF THE BEST BOOKS FOR REFERRING TOPICS RELATED TO MARKETS.