Figure 8.6 Perfectly Competitive Firm’s Short-Run Supply Curve

Because a firm will only operate in the short run when the market price is above its average variable cost curve AVC, the perfectly competitive firm’s short-run supply curve is the portion of the marginal cost curve MC above AVC. At prices below AVC, the firm shuts down, its quantity supplied is 0, and its supply curve is represented by the y-axis.