Question

Describe how firms in Perfect Competition achieve both allocative and productive efficiency and their significance in relation to the other market models. Why is the portion of the marginal cost curve above the minimum average variable cost the short run supply curve in Perfect Competition?

Answer 1

Firms in perfect competition are price-takers. As a result, the only way in which they can maximize their profits is by minimizing their costs.

Step-by-step explanation:

The variable cost is the point where a firm can operate in the short run and the long run, all costs are variable, the firm's supply schedule is the portion of the marginal cost curve above the average variable cost.