Thus, only the part of the short run marginal cost curve which lies above the average variable cost forms the short-run supply curve of the firm. The firm will not produce any output at a price below OD, since it will not be fully recovering its variable costs. It is thus clear that short-run marginal cost curve of the firm ii in fact the short-run supply curve of the firm. Likewise, at price OS, the firm will produce and supply OL quantity of the product. Similarly, at price OU the quantity produced or supplied will be ON, since price OU equals marginal cost at output ON.
The short-run marginal cost curve of the firm therefore indicates the quantities which the firm will produce in the short run at different prices.Ĭonsider Figure 23.9 at price OP, the firm will produce and offer for sale OM quantity of the good, because at OM quantity of the good, price OP equals marginal cost. The horizontal coordinate of a point on the rising marginal cost curve measures the quantity of the good that the firm will produce at that price. Since the price for a perfectly competitive firm is given and constant for it, price line will be a horizontal straight line. We know that the firm under perfect competition produces that amount of the good at which marginal cost equals price. The Short-Run Supply Curve of the Perfectly Competitive Firm!Īs is known, the short-run is a period in which more quantity of the good is produced by working the given capital equipment or plant more intensively by employing more amounts of the variable factors.
0 kommentar(er)
