Economics · Firm Supply Curve
Given below are two statements: Assertion (A): For a profit-maximising firm under perfect competition, the supply curve in the short run is the portion of the MC curve that lies above the minimum of the AVC curve. Reason (R): Below the minimum AVC, the firm cannot cover its variable costs and is better off shutting down production in the short run, even though fixed costs are sunk. Choose the most appropriate answer from the options given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(A) is false but (R) is true.
- 2(A) is true but (R) is false.
- 3Both (A) and (R) are true, but (R) is NOT the correct explanation of (A).
- 4Both (A) and (R) are true, and (R) is the correct explanation of (A).✓
Correct answer
Both (A) and (R) are true, and (R) is the correct explanation of (A).
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