Question

Consider a firm that produces and sells units of a good in a perfectly competitive market. The firm's supply curve identifies:

1) the minimum quantity supplied at each price, holding all other factors constant
2) the maximum quantity supplied at each price, holding all other factors constant
3) the firm's minimum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant
4) the firm's maximum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant

Answer 1

In a perfectly competitive market, a firm's supply curve shows its minimum willingness to accept for each unit produced, guiding production decisions based on the market price and marginal cost.

Step-by-step explanation:

The firm's supply curve in a perfectly competitive market represents the firm's minimum willingness to accept for each incremental unit of the good, holding all other factors constant. This curve indicates how a firm decides the quantity of goods to produce based on the market price and their marginal cost (MC). Since the firm must accept the market price, it looks to produce where the price (P) equals MC, but no lower than the minimum point on the average variable cost curve, making the marginal cost curve above this point the firm's supply curve.