Question

In a perfectly competitive market, the market supply curve is a. always a horizontal line. b. the vertical sum of all the individual firms’ supply curves. c. the horizontal sum of all the individual firms' supply curves. d. the marginal cost curve above average total cost for a representative firm

Answer 1

Answer:

C) the horizontal sum of all the individual firms' supply curves.

Explanation:

The main characteristics of a perfectly competitive market is that the number of suppliers and consumers is very large, and the products or services supplied are all identical or extremely similar. That means that all the products or services supplied are substitutes from each other. E.g. a bushel of wheat is the same whether is was grown in Kansas or Ohio. This results in all suppliers and consumers being price takers, since no one has enough market power to determine the price.

The supply curve in a perfectly competitive market is upward sloping, meaning that at a higher price, suppliers will be willing to sell more products or services. To determine the total market supply curve, you must add together all the individual supply curves from every supplier. The same should be done with the market demand curve, only that you need to add together all the individual supply curves from every consumer. Since the supply curves are upward sloping, you must add horizontally.

Answer 2

Answer: C.) Horizontal sum of all the individual firm's supply curve

Explanation: A perfectly competitive market, is that in which sellers or suppliers of a certain product are numerous such that a slight increase in price, and demand could fall to 0. Here, an individual seller has no control over the price of commodities. The supply curve tells how much quantity will be produced at different prices. Therefore the market supply curve is determined by all individual sellers individual price in other to determine the overall quantity to be produced at varying market price. Prices are drawn horizontally from the y-axis to determine quantity produced at different prices for each indivudual seller which is summed to generate the market supply curve.