Competitive business maximizes profit by producing the amount of output where the section of a competitive firm's marginal cost curve above the minimum of the average variable cost curve is called the supply curve since if the marginal cost curve is lower than the average variable cost curve, the firm will shut down.A firm produces by moving along its supply curve, which is the same as its marginal cost curve in a perfectly competitive firm.
As a result, in a competitive market, the supply curve and marginal cost curve of any individual firm are equal.The section of the marginal cost curve above the average variable cost curve is used to create the supply curve. The marginal cost curve is skewed because the marginal cost curve, like the firm's supply curve, is positively sloped due to the rule of declining marginal returns. Because the marginal cost curves of all firms in a fully competitive industry are all positively sloped, the market supply curve for the entire industry is also positively sloped.
In the short run, the fact that market supply and marginal cost are the same is only true.The lateral sum of all enterprises' supply curves is the industry supply curve. Because it is not a price taker, a monopolist (a company with market power) does not have a supply curve.
It selects the profit-maximizing price-quantity combination from the market demand curve's possible combinations. The firm's monopoly determines the price at which it wishes to sell its goods. At this point, the monopoly maximizes its profit. There is no supply curve in a monopoly since there is no unique price-quantity relationship because the quantity supplied by a monopoly firm is determined by marginal revenue rather than price, given the marginal cost curve.
