Question

The lowest point on a purely competitive firm's short-run supply curve corresponds to __________. a. the minimum point on its ATC curve. b. the minimum point on its MC curve. c. the minimum point on its AVC curve. d. the minimum point on its AFC curve.

Answer 1

Answer: Option 'b' is correct.

Explanation:

The lowest point on a purely competitive firm's short run supply curve corresponds to the minimum point on its MC curve.

As we know the relation between ATC, AVC, AFC, MC.

1) when AC > MC then, MC rises,

2) When AC = MC, then AC reaches its minimum point.

3) When AC < MC , then MC falls.

And MC falls at higher rate than AC,

So, MC reaches its minimum point first and it is the lowest point for perfect competition.

Hence, Option 'b' is correct.