Asked by Ashley Scott on May 07, 2024
Verified
Short-run supply curves for perfectly competitive firms tend to be upward sloping because:
A) there is diminishing marginal product for one or more variable inputs.
B) marginal costs increase as output increases.
C) marginal fixed costs equal zero.
D) A and B are correct.
E) B and C are correct.
Diminishing Marginal Product
A principle stating that as more of a variable input is added to a fixed input, the additional output produced from each additional unit of the variable input eventually decreases.
Marginal Costs
The supplementary cost arising from the manufacture of an extra unit of a good or service.
Variable Inputs
Inputs that can be adjusted in the short term to alter the level of output in the production process.
- Understand the relationship between marginal cost, average variable cost, fixed costs, and their implications for short-run supply curves.
Verified Answer
SK
Samantha KuilanMay 09, 2024
Final Answer :
D
Explanation :
The short-run supply curve for a perfectly competitive firm is upward-sloping due to both the law of diminishing marginal returns (which leads to increasing marginal costs) and the fact that fixed costs do not vary with output in the short run. Therefore, both options A and B are correct. Option C, which suggests that marginal fixed costs are zero, is not necessarily true and is not a reason for the upward slope of the supply curve in the short run.
Learning Objectives
- Understand the relationship between marginal cost, average variable cost, fixed costs, and their implications for short-run supply curves.