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JAMB Economics 2005 Question 26

Question 26

Market Structures

Under perfect competition, the short-run supply curve of a firm is determined by its

  1. A.total cost curve
  2. B.marginal cost curve
  3. C.average fixed cost curve
  4. D.average cost curve
Show the answer and explanation

Answer: B (marginal cost curve)

Explanation

A competitive firm produces where price = marginal cost, so its supply curve is its MC curve above average variable cost.