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JAMB Economics 2000 Question 20

Question 20

Market Structures

In a price-taking firm, the portion UT above is the firm's

Diagram for this question
  1. A.average revenue curve
  2. B.supply curve
  3. C.demand curve
  4. D.long-run average cost curve.
Show the answer and explanation

Answer: B (supply curve)

Explanation

A price-taking firm produces where price = MC, but only if price covers AVC. So the part of MC above the AVC curve (UT) is its short-run supply curve.