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    Question

    What is the supply curve of a firm in Perfect

    Competition?
    A Marginal cost curve Correct Answer Incorrect Answer
    B Marginal cost curve below the Average Cost Correct Answer Incorrect Answer
    C Marginal cost curve above the Average cost Correct Answer Incorrect Answer
    D Marginal cost curve above the Average Variable Cost Correct Answer Incorrect Answer

    Solution

    The individual supply curve shows how much output a firm in a perfectly competitive market will supply at any given price. Provided that a firm is producing output, the supply curve is the same as marginal cost curve. When market price is below Average variable cost (AVC), the firm will not produce and would shut down. As such, the supply curve in a perfectly competitive market would only be that part of MC curve which is above AVC.

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