Free CFA Certification Practice Questions:
Which of the following BEST describes the short-run supply curve for a firm
operating under perfect competition?
A) Short run supply curve is the segment of the Marginal Cost [MC] curve above the Average Variable Cost [AVC] curve
B)Short run supply curve is the segment of the Marginal Cost [MC] curve below the Average Variable Cost [AVC] curve
C) Short run supply curve is the segment of the Marginal Cost [MC] curve above the Average Total Cost [ATC] curve
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[Ans: A]
The short run supply curve for a perfectly competitive firm is the marginal cost (MC) curve above the average variable cost (AVC). This is because when prices drop below average variable cost, the firm will shut down in the short run.
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