1. A firm’s marginal cost curve above the average variable cost curve is equal t
ID: 1214814 • Letter: 1
Question
1. A firm’s marginal cost curve above the average variable cost curve is equal to the firm’s individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the firm’s individual supply curve if marginal costs increase?1. A firm’s marginal cost curve above the average variable cost curve is equal to the firm’s individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the firm’s individual supply curve if marginal costs increase?
1. A firm’s marginal cost curve above the average variable cost curve is equal to the firm’s individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the firm’s individual supply curve if marginal costs increase?
Explanation / Answer
The firm's short run supply curve is equal to its marginal cost.
Marginal cost=price
When the MC increases, the price faced by the firm increases. Therefore, the supply curve of the firm shifts rightwards when the MC increases.
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