When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve...

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

a. the position of the marginal cost curve determines the price for which the firm should sell its product.

b. among the various cost curves, the marginal cost curve is the only one that slopes upward.

c. the marginal cost curve determines the quantity of output the firm is willing to supply at any price.

d. the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.

Solutions

Expert Solution

In a perfectly competitive market, marginal cost is the supply curve because firm equates price with marginal cost. This is because in a perfectly competitive market price is equal to marginal revenue.

Rahul Sunny answered 2 years ago

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