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Use your own language to explain that short run supply curve by a price-taking firm is...

Use your own language to explain that short run supply curve by a price-taking firm is the positively-sloped portion of the short-run marginal cost curve. Please show more detail in the explanation。

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Answer #1

The supply curve of a price taking firm in the short run starts from the minimum of average variable cost. This implies that the firm will not supply any unit in the market if it is getting a price which is less than its average variable cost. this happens because the firm is not able to cover its variable cost of production let alone the fixed cost.

The supply curve then follows the marginal cost of production. This is because the profit maximizing rule suggests MR = MC and in competitive market MR = P is fixed for a single firm. Now for a given price, firm looks at its marginal cost of production to determine how much to supply in the market.

Due to this reason the upward sloping portion of the marginal cost curve that is starts from the minimum of average variable cost exhibit the supply curve for a single firm.

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