Authors libby rittenberg 491

Figure 9.10 Marginal Cost and Supply

The supply curve for a firm is that portion of its MC curve that lies
above the AVC curve, shown in Panel (a). To obtain the short-run
supply curve for the industry, we add the outputs of each firm at each
price. The industry supply curve is given in Panel (b).
Now suppose that the astrological forecast industry consists of Madame
LaFarge and thousands of other firms similar to hers. The market supply
curve is found by adding the outputs of each firm at each price, as shown in
Panel (b) of Figure 9.10 "Marginal Cost and Supply". At a price of $10 per
call, for example, Madame LaFarge supplies 14 calls per day. Adding the
quantities supplied by all the other firms in the market, suppose we get a
quantity supplied of 280,000. Notice that the market supply curve we have
drawn is linear; throughout the book we have made the assumption that
market demand and supply curves are linear in order to simplify our
analysis.
Looking at Figure 9.10 "Marginal Cost and Supply", we see that profitmaximizing choices by firms in a perfectly competitive market will
Attributed to Libby Rittenberg and Timothy Tregarthen
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