Derivation Of A Firm�S Supply Curve In A Perfectly Competitive Market
Economics notes
Derivation Of A Firm�S Supply Curve In A Perfectly Competitive Market
➡️ In the short run, a shutdown price is the price at which a firm will cease production due to the cost of production exceeding the revenue generated from selling the product.
➡️ In the long run, a shutdown price is the price at which a firm will cease production due to the cost of production exceeding the average total cost of production.
➡️ In both the short run and the long run, the shutdown price is an important factor in determining the optimal level of production for a firm.
What is a firm's supply curve in a perfectly competitive market?
In a perfectly competitive market, a firm's supply curve is determined by its marginal cost curve. The marginal cost curve represents the additional cost of producing one more unit of output. The firm will supply output as long as the price it receives is greater than or equal to its marginal cost.
How is a firm's supply curve derived in a perfectly competitive market?
A firm's supply curve in a perfectly competitive market is derived by plotting the firm's marginal cost curve above its average variable cost curve. The point where the two curves intersect is the minimum point of the average variable cost curve, which represents the firm's shutdown point. The supply curve is then the portion of the marginal cost curve that lies above the shutdown point.
What factors can shift a firm's supply curve in a perfectly competitive market?
A firm's supply curve in a perfectly competitive market can be shifted by changes in its production costs, such as changes in the prices of inputs or changes in technology. It can also be shifted by changes in the number of firms in the market, which can affect the market price and the firm's profitability. Finally, changes in government policies, such as taxes or subsidies, can also shift a firm's supply curve.