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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

A competitive firm’s short-run supply curve is its ________ cost curve above its ______ cost curve.

a. average total, marginal

b. average variable, marginal

c. marginal, average total

d. marginal, average variable

To determine
The cost curves effects on short run supply curve.

Explanation

Option (d):

In the short run, a firm would shut down if the price is equal to or greater than the average variable cost; then, the firm would produce goods and services. If the price is less than the average variable cost, then the firm would close the production. Thus, the marginal cost curve above the average variable cost curve depicts the short run supply curve of the firm. Hence, option ‘d’ is correct.

Option (a):

The supply curve, in the short run, is depicted by the marginal cost of the firm...

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