How do you derive supply curve of a perfectly competitive industry ?
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Under perfect competition average revenue is equal to marginal revenue, so the firm will produce up to that point where marginal revenue and marginal cost are equal. ADVERTISEMENTS: Short run supply curve of a perfectly competitive firm is that portion of marginal cost curve which is above average variable cost curve.
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Explanation:
The supply curve for a competitive industry is just the horizontal sum of the marginal cost curves of all the individual firms belonging to the industry. This supply curve, based as it is on the short-run marginal cost curves of the firms in the industry, is the industry's short-run supply curve.
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