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Describe how we can identify a competitive firm’s short-run supply curve.
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- What is the short run Supply Curve for a competitive firm?What is the relationship between marginal cost and the short-run supply curve for the purely competitive firm?The following graph shows the demand curve, as well as the AVC, ATC and MC curves of a company selling rolled oats in a perfectly competitive market. Use the graph to answer the questions. The goal of the company is to maximize its profit. How many boxes of rolled oats should it sell to attain this goal? What price will it charge? How much profit does this firm make per month? Will this company produce or shut down in the short run? Why? Will this firm exit the market for rolled oats in the long run or not? Why?
- If firms in a competitive industry incur an economic profit, what happens to supply, price, output, and economic profit in the long run? Explain“That segment of a competitive firm’s marginal-cost curve that lies above its average-variable-cost curve constitutes the shortrun supply curve for the firm.” Explain using a graph and words.In a perfectly competitive market, how do we go from a short run equilibrium to a long run equilibrium?
