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Marginal Cost Curve in Firm's Supply Curve

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6. What portion of the marginal cost curve is the competitive firm's supply curve? How is a competitive firm's marginal cost curve related to the market supply curve?

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Solution Summary

The portion of the marginal cost curve in a competitive firm's supply curve is determined.

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In economics, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. Mathematically, the marginal cost (MC) function is expressed as the derivative of the total cost (TC) function with respect to quantity (Q). Note that the marginal cost may change with volume, and so at each level of production, the marginal cost is the cost of the next unit produced.

A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average ...

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