The+MC+Curve+is+the+Supply+Curve+for+the+Individual+Firm


 * REALLY?**

Yes, it's true! In the short run of pure competition the Marginal Cost Curve represents the Supply Schedule. **HOWEVER!** Not **all** of the Marginal Cost Curve represents the supply schedule. This is because of the relationship between the ATC and AVC curves in conjunction with the MC and Price curves. As we know, when ATC and AVC are both //above// the point where Marginal Cost meets Price, the firm will shut down in the short run. So, expanding this knowledge, we become aware that all points that lay on the Marginal Cost curve below this point are **also** shut down points!

We can also verify that the Marginal Cost curve is the Supply Schedule in the short run through observing the effect of technology on costs. As we learned earlier in the year, if a firm is to suddenly come upon a technological advance in production, costs would decrease. This shifts the marginal cost curve downward, or rightward. We know that if we were to look at a similiar, more simple graph, of just a demand/supply graph, the same would happen to just the supply curve. So, this further enforces the fact that the MC curve **is** the Supply schedule in the short run.


 * VIDEO

media type="youtube" key="LlLbPNZDkDQ" height="344" width="425"

LINKS

[competition, short-run supply curve] http://www.boisestate.edu/econ/lreynol/web/PDF/short_12_pure_comp.pdf http://www.agecon.msstate.edu/turner/classes/chap011handout.pdf

PHOTO

Quiz: Where does the supply curve end (in terms of the marginal cost graph) and why?

A. MC=ATC, because then marginal cost will start to pull average cost up. B. MC=AFC becasue then there are no variable costs C. MC=MR because it is the profit maximizing strategy D. MC=AVC because the firm will shut down and there is no supply for a quintity in which the firm is not producing

Answer: D**