166k views
0 votes
A purely competitive firm short run supply curve is?

1) upward sloping
2) downward sloping
3) horizontal
4) vertical

1 Answer

5 votes

Final answer:

A purely competitive firm's short run supply curve is upward sloping, as a firm tends to supply a larger quantity at higher prices or when there is a decrease in production costs.

Step-by-step explanation:

A purely competitive firm's short run supply curve is typically upward sloping. This reflects the fact that as prices increase, the firm is willing to supply more of its product. This is because higher prices can lead to increased profits, incentivizing firms to increase output. Similarly, when costs of production fall, a firm may supply a larger quantity at any given price, as represented by a supply curve shifting to the right.

In a perfectly competitive market, a firm views its demand curve as flat, meaning it can sell any quantity at the same price. However, a monopolist sees a downward-sloping demand curve, which shows the inverse relationship between price and quantity demanded. In both cases, the supply curve is upward because profit motivation and production costs influence the quantity supplied at given prices.