What is the supply curve of a firm in the long run?


In the long run as there is no fixed cost so the perfectly competitive firm supply curve will be the summation of upward sloping portion of marginal cost above the minimum point of average cost (when price is more than or equal to minimum of average cost ) and the vertical portion of the price axis (when price is less than minimum of average cost).

When price is more than or equal to the minimum of average cost



At market price OP which is more than average cost, MC is equal to MR at point N. MC is positively sloped at this point of intersection. The price is greater than minimum average cost so the firm is at long run equilibrium producing a few units of output supply curve is represented by the upper portion of marginal cost curve above minimum of average cost.


When price is less than minimum of average cost


Now suppose the market price faced by the form is OP1 which is less than minimum average cost. At this price the firm would not produce any output because producing any output will result in loss. Therefore the firm will not produce anything the supply curve in long run for price less than minimum of average cost is represented by vertical part of the price axis.



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