Question

A firms supply curve is equal to _________________ above the minimum point on the ________________curve. Select the correct answer below: marginal revenue; average total cost marginal cost; average variable cost average total cost, marginal cost average variable cost, average total cost

Answer 1

Answer:

The correct answer is: marginal cost; average variable cost.

Explanation:

The supply curve of a perfectly competitive firm is equal to its marginal cost curve above the minimum point of its average variable cost. This happens because the firm supplies at the point where its price is equal to marginal cost and covering the average variable cost.  

In case the product price does not cover the average variable cost, the firm will stop production.