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In a perfectly competitive firm, MC curve above AVC is the _____ Curve of the firm
- a)Average cost
- b)Marginal revenue
- c)Demand
- d)Supply
Correct answer is option 'D'. Can you explain this answer?
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In a perfectly competitive firm, MC curve above AVC is the _____ Curve...
The MC curve above AVC is the Supply Curve of the firm
Explanation:
The MC (Marginal Cost) curve represents the additional cost incurred by a firm to produce an extra unit of output. On the other hand, the AVC (Average Variable Cost) curve represents the variable cost per unit of output. In a perfectly competitive market, a firm is a price taker, i.e., it cannot influence market price. Thus, a firm will maximize its profits by producing at the output level where marginal cost equals market price.
When the MC curve is above the AVC curve, the firm is still covering its variable costs. In this case, the firm will continue to produce in the short run, even though it is incurring losses. However, if the market price falls below the AVC curve, the firm will shut down its operations in the short run.
The supply curve of a firm represents the minimum price at which a firm is willing to sell a particular quantity of output. In other words, it is the marginal cost curve above the AVC curve. This is because a firm will only produce and sell a particular quantity of output if it can cover its variable costs. Therefore, in a perfectly competitive market, the supply curve of a firm is upward sloping and starts from the point where the marginal cost curve intersects the AVC curve.
In conclusion, the MC curve above the AVC curve is the supply curve of the firm in a perfectly competitive market.
Explanation:
The MC (Marginal Cost) curve represents the additional cost incurred by a firm to produce an extra unit of output. On the other hand, the AVC (Average Variable Cost) curve represents the variable cost per unit of output. In a perfectly competitive market, a firm is a price taker, i.e., it cannot influence market price. Thus, a firm will maximize its profits by producing at the output level where marginal cost equals market price.
When the MC curve is above the AVC curve, the firm is still covering its variable costs. In this case, the firm will continue to produce in the short run, even though it is incurring losses. However, if the market price falls below the AVC curve, the firm will shut down its operations in the short run.
The supply curve of a firm represents the minimum price at which a firm is willing to sell a particular quantity of output. In other words, it is the marginal cost curve above the AVC curve. This is because a firm will only produce and sell a particular quantity of output if it can cover its variable costs. Therefore, in a perfectly competitive market, the supply curve of a firm is upward sloping and starts from the point where the marginal cost curve intersects the AVC curve.
In conclusion, the MC curve above the AVC curve is the supply curve of the firm in a perfectly competitive market.
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In a perfectly competitive firm, MC curve above AVC is the _____ Curve of the firma)Average costb)Marginal revenuec)Demandd)SupplyCorrect answer is option 'D'. Can you explain this answer?
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