The previous chapter showed that firms experience diminishing marginal product in the short run. This diminishing marginal product implies that the marginal cost of producing additional units of output is rising. An upward-sloping marginal cost curve is an important concept because it allows us to understand something called the law of supply.
After completing this chapter, the student should be able to:
1. Explain how the upward-sloping marginal cost curve serves as the basis for the upward-sloping supply curve.
2. Understand how several determinants of supply can shift the supply curve outward or inward.
3. Compute and interpret the price elasticity of supply.
You might recall from ...