Question

The short-run supply curve of a firm is:

• A. The downward-sloping portion of the SMC curve
• B. The rising portion of the SMC curve above the minimum AVC
• C. The entire SMC curve
• D. The portion of the SMC curve below AVC

Hint:

Short-run supply curve: \[ \mathrm{SMC\ above\ minimum\ AVC} \] Shutdown condition: \[ P<AVC \]

Answer 1

The Correct Option is B

Step 1: Understand short-run supply curve.
In the short run, a firm will continue production only if: \[ P \geq AVC \] If price falls below AVC, the firm shuts down.

Step 2: Relation between SMC and supply curve.
The firm's short-run supply curve is: \[ \mathrm{That\ portion\ of\ SMC\ curve\ which\ lies\ above\ minimum\ AVC} \] because:
• SMC determines output level
• AVC determines shutdown point

Step 3: Analyze the options.
Option (A) Downward-sloping portion cannot be supply curve. \[ \Rightarrow \mathrm{Incorrect} \] Option (B) Correct definition of short-run supply curve. \[ \Rightarrow \mathrm{Correct} \] Option (C) Entire SMC curve includes portion below AVC. \[ \Rightarrow \mathrm{Incorrect} \] Option (D) Below AVC firm shuts down. \[ \Rightarrow \mathrm{Incorrect} \]

Step 4: Identify the correct option.
Therefore: \[ \boxed{\mathrm{The\ rising\ portion\ of\ SMC\ above\ minimum\ AVC}} \] Hence, the correct answer is: \[ \boxed{\mathrm{(B)}} \]