Why is a competitive firms marginal cost curve regarded as its supply curve quizlet?

Q: How is a firms marginal cost curve related to the market supply curve quizlet?

How is a firms marginal cost curve related to the market supply curve? The sum of all the individual firms marginal cost curves (above the minimum AVC curve) is the market supply curve.

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Why is a competitive firm's marginal cost curve regarded as its supply curve?
Why is a competitive firm's marginal cost curve regarded as its supply curve quizlet?
What is the relationship between a perfectly competitive firm marginal cost curve and its supply curve?
How is a firm's marginal cost curve related to the market supply curve quizlet?

Terms in this set (32)

As a perfectly competitive firm produces a greater quantity of output, its total revenue steadily increases at a constant rate determined by the given market price. Profits will be highest (or losses will be smallest) at the quantity of output
where total revenues exceed total costs by the greatest amount (or where total revenues fall short of total costs by the smallest amount). Alternatively, profits will be highest where marginal revenue, which is price for a perfectly competitive firm, is equal to marginal cost. If the market price faced by a perfectly competitive firm is above average cost at the profit-maximizing quantity of output, then the firm is making profits. If the market price is below average cost at the profit-maximizing quantity of output, then the firm is making losses. If the market price is equal to average cost at the profit-maximizing level of output, then the firm is making zero profits. The point where the marginal cost curve crosses the average cost curve, at the minimum of the average cost curve, is called the "zero profit point." If the market price faced by a perfectly competitive firm is below average variable cost at the profit-maximizing quantity of output, then the firm should shut down operations immediately. If the market price faced by a perfectly competitive firm is above average variable cost, but below average cost, then the firm should continue producing in the short run, but exit in the long run. The point where the marginal cost curve crosses the average variable cost curve is called the shutdown point.

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Why is a competitive firm's marginal cost curve regarded as its supply curve?

Provided that a firm is producing output, the supply curve is the same as marginal cost curve. The firm chooses its quantity such that price equals marginal cost, which implies that the marginal cost curve of the firm is the supply curve of the firm.

Why is a competitive firm's marginal cost curve regarded as its supply curve quizlet?

he marginal cost curve determines the quantity of output the firm is willing to supply at any price. average total cost exceeds the price.

What is the relationship between a perfectly competitive firm marginal cost curve and its supply curve?

For a perfectly competitive firm, marginal revenue equals price and average revenue. This implies that the firm's marginal cost curve is its short-run supply curve for values greater than average variable cost. If price drops below average variable cost, the firm shuts down.

How is a firm's marginal cost curve related to the market supply curve? The sum of all the individual firms' marginal cost curves (above the minimum AVC curve) is the market supply curve.