Aplia Student Question Aplia Student QuestionHaschak Sisters

Aplia: Student Question Aplia: Student QuestionHaschak Sisters- YouTube x G6.Deriving the short-run s Haschak Sisters-YouTube x G 6. Deriving the short-run s Economics question | Cheg x a Economics question ! Che x × fi D courses aplia.com/af ser let/quiz?quiz action=takeQuiz&quiz; probGuid-Q4PLCOA801010000002dfc8510090000&ctXemitchchark-0019;&attempt-3; 0 eb. AppsCareerBoltz | Job S 6. Deriving the short-run supply curve Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry 100 90 80 70 60 50 TC 40 30 20 10 AVC 0 3 6 9 12 15 18 21 24 2730 QUANTITY (Thousands of jackets) 57:54 Timeout

Solution

Answer: In the first image, that portion of MC curve which is lying over and above AVC curve is supply curveof the firm. It is so because if price falls below AVC, the firm will shut down and thereafter it will supply at a price which covers its marginal cost atleast.

It should be noted that in our analysis of deriving short-run supply curve of the firm, we have assumed that following the rise in price when the firm expands its output or supply, prices of re­sources or inputs it uses for production do not go up.

It is a valid assumption because an individual firm under perfect competition is only one among many and its demand for inputs or resources is insignificant part of the total market demand for them and therefore the increase in demand for these resources by the firm as it expands will have no effect on their prices.