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According to the source, for a perfectly competitive firm, what does the marginal cost curve become above the minimum point of the average variable cost curve?
AThe firm's average cost curve
BThe firm's own supply curve
CThe firm's own demand curve
DThe market's supply curve
Answer & Solution
Correct answer: B. The firm's own supply curve
1. A firm decides how much to produce by checking the market price against its marginal cost, as long as that price at least covers minimum average variable cost.
2. That is exactly the logic of a supply curve: how much a firm will offer at each price.
3. The marginal cost curve above minimum average variable cost becomes the firm's supply curve.
4. The firm's demand curve is a separate, horizontal line at the market price, not the marginal cost curve.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 8 "Perfect Competition", section 8.2 | How Perfectly Competitive Firms Make Output Decisions_
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