Question on: JAMB Economics - 2002

The marginal cost curve above the point of shut-down represents the firm's supply curve in the short run. Here's why:

• Shut-down point: This is the point where the firm's revenue is just enough to cover its variable costs. Below this point, the firm minimizes losses by shutting down.
• Marginal cost and supply: The marginal cost curve shows the additional cost of producing one more unit. In a competitive market, a firm will supply goods where the price (which equals marginal revenue) is equal to or greater than its marginal cost. Above the shut-down point, the marginal cost curve effectively represents the quantity a firm is willing to supply at different prices.
• Other options: The demand curve represents the quantity of goods consumers are willing to buy at different