Question

a perfectly competitive indistry's short-run's supply curve is described as?

A.horizontal

B.perfectly elastic

C.the upward-slopping portion of the largest firms's marginal cost curve

D.the horizontal summation of the supply cirves for all individual firms

E.perfectly inelastic

Answer 1

In a perfectly competitive industry, the short-run supply is that part of the Marginal cost curve which lies at and above the shut-down point. you must be thinking now that option-c could be the correct answer but it is not because the option says it is the upward-sloping portion of the largest firm's MC curve, this is not correct because supply curve is the upward-sloping portion of the MC curve of the market. So Option-D is the correct answer that the short-run supply curve is the horizontal summation of the supply curves for all the individual firms because there are many firms supplying the homogeneous product and total supply is calculated by summing up the individual demands.