Final answer:
The marginal cost curve of a perfectly competitive firm doubles as the supply curve, starting from the minimum of the average variable cost curve, because the firm produces to where price equals marginal cost, which is also the marginal revenue in such markets.
Step-by-step explanation:
For a perfectly competitive firm, the marginal cost curve is identical to the firm’s supply curve starting from the minimum point on the average variable cost curve. This is because a perfectly competitive firm takes the market price as given, which equals the firm's marginal revenue (MR). Therefore, to maximize profits, the firm produces the quantity where the price (P) equals the marginal cost (MC), which is also the firm's marginal revenue (MR).
In a perfectly competitive market, the firm's supply curve is determined by the portion of the marginal cost curve that lies above the minimum point of the average variable cost curve. As the market price changes, the firm adjusts its output level to where the new price equals the marginal cost, thus altering the quantity supplied.
On a graph, if we imagine the marginal cost curve starting from the minimum of the average variable cost curve and going upwards, this represents the supply curve because it shows the minimum price at which the firm is willing to supply each additional unit of the good.