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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

A firm’s marginal cost curve above the average variable cost curve is equal to the film’s individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the film’s individual supply curve if marginal costs increase?

To determine

The marginal cost curve above the variable cost curve as the individual supply curve of the firm.

Explanation

To understand why the marginal cost curve above the variable cost curve is equal to the firm’s individual supply curve, we need to understand what the marginal curve shows. It shows the cost that a firm incurs when an additional unit of the output is produced.

When the marginal cost curve cuts the average variable cost curve, the average variable cost is at its lowest point before it starts rising. After the marginal cost curve cuts the average cost curve, the marginal cost curve rises faster than the average cost curve. At all points above this, the marginal cost is above the average cost curve...

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