Question

consider a price-taking firm with a minimum effecient scale of production of a quantity greater than zero. explain how the firm's supply curve would be derived. describe how it would look like if you were able to draw a graph.

Answer 1

A price taking firm doesn't set price , instead ot sell at price determined by industry/ market.

In short run the supply curve of a price taking firm is nothing but Marginal cost curve above minimum average Variable cost/ or shut down price.

The long run supply curve is horizontal straight line at minimum average total cost,which tells in long run price will be equal to Minimum average total cost, irrespective of firm supply and firm will earn normal economic Profit.