Question

Understand how the short-run supply curve for a perfectly competitive firm is determined

Short answer

We start by equalizing p1 with SMC on the increasing a part of the SMC curve; this results in the output degree q1.

Step-by-step solution

Introduction

Let's build a low supply funnel for such a company. The argument will then be separated into two sections. Once the current expense seems to be larger than or equal towards the lowest Price, estimate a startup's investor product extent. Once the retail price is far less than the lowest Price, one can already compute the firm's investor produce extent. Because when cost price will be less than the lowest Price, then too can compute a firm's investor produce amount.

Given Information

The figure shows the output levels chosen by a profit-maximizing firm within the short run two values of the market place.

Explanation

The output level of the firm is p2: when the value is p1, the firm produces zero output Assume that the market cost price is p1, which surpasses the minimum AVC. we start by equalizing p1 with SMC on the increasing a part of the SMC curve; this results in the output degree q1. Moreover, its AVC during Q1 doesn't quite above the industry total cost, p1. Like an outcome, a few of the part iii pre - requisites is satisfied in q1. As either a conclusion, once the current expense becomes p1, then company's summary outstanding achievement becomes q1.