Supply curve is the rising portion of marginal cost curve over and above the minimum of average variable cost curve. Do you agree? Support your answer with valid reason.
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Yes, we do agree with the given statement that supply curve is the rising portion of marginal cost mover and above the minimum of average variable cost curve.At a given price, a firm strikes its equilibrium when
Price= MC and MC is rising.In the short run, a firm must cover its variable cost. So that, it will undertake production only if TR = TVC orTR/Q= TVC/Qor AR = AVC,
or P = AVC.
Therefore, short run supply curve of the firm starts from its shut-down point, the point where P = AVC.
Price= MC and MC is rising.In the short run, a firm must cover its variable cost. So that, it will undertake production only if TR = TVC orTR/Q= TVC/Qor AR = AVC,
or P = AVC.
Therefore, short run supply curve of the firm starts from its shut-down point, the point where P = AVC.
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1
Explanation:
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Answer: Budget Set: Budget set refers to the attainable combinations of a setof two goods, given prices of the goods and income of the consumer. ... Similarly, if income of the consumer remains unchanged, the budget linewill shift to the right when there is a proportionate fall in the prices of both goods X and Y.
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