Chapter 59, Problem 5MCQ

To determine

To determine the curve that corresponds with the short-run supply curve.

Answer to Problem 5MCQ

(c) The MC curve.

Explanation of Solution

The marginal cost curve of a firm also acts as the supply curve of the firm. In the short run, above the minimum of average variable costs, the firm would be willing to produce for the market at various price levels where the price is equal to marginal cost. Above the minimum of AVC, the marginal cost curve is upward sloping and it gives us the supply curve of the firm. Hence (c) is the correct answer.

Average costs such as Average total costs, average variable costs, and average fixed costs do not affect the supply curve as it is derived from the marginal costs of the firm. Hence (a), (b), (d), and (e) are the incorrect answer.

Economics Concept Introduction

Introduction:

The marginal cost of a firm in the short-run works as the supply curve of the firm. Above the minimum of average variable costs, that is the shutdown price, the marginal cost curve of the firm is upward sloping and it also acts as a supply curve. It shows the quantity sold by the firm in the market at various profit-maximizing price levels.