Firm Supply Curves and Market Supply Curves

The demand curve describes how either one consumer or a group of consumers would change the amount they would purchase if the price were to change. Producers may also adjust the amounts they sell if the market price changes.

Recall from chapter 2 the principle that a firm should operate in the short run if they can achieve an economic profit; otherwise the firm should shut down in the short run. If the firm decides it is profitable to operate, another principle from chapter 2 stated that the firm should increase production up to the level where marginal cost equals marginal revenue.

In the case of a flat demand curve, the marginal revenue to a firm is equal to the market price. Based on this principle, ...

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