The very short-run supply curve of a competitive firm is _____

Economics Dec 09, 2020

The very short-run supply curve of a competitive firm is _____.

A. a horizontal line

B. a vertical line

C. the marginal cost curve that lies above its AVC curve

D. the marginal cost curve that lies above its ATC curve

Expert Solution

The correct option is:

C. the marginal cost curve that lies above its AVC curve

The rising part of the marginal cost curve that lies above the average variable cost serves as the very short-run supply curve of the competitive firms. The quantity supplied by the firm will be equal to the point where the price is equal to the marginal cost curve. Any point below the average variable cost curve leads to losses for the firm in the short run.

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