Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition NCERT Solutions | What is the supply curve of a firm in th
What is the supply curve of a firm in the long run?
In the long run as there is no fixed cost the perfectly competitive firms supply will be the summation of the upward sloping portion of SMC above the minimum point of LAC (When price minimum LAC) and the vertical portion of the price axis (when price minimum of LAC) the long run supply curve of a perfect competitive firm is derived in two stages.
1. When price is equal to the minimum of LAC:
Let us suppose that the firm is facing market price OP that exceeds the minimum of LAC. MC is equal to MR (at point E) and MC is positively sloped at this point of intersection. Also the price is greater than the
minimum of LAC. Thus the firm is at long run equilibrium facing the price OP and producing Oq1 units of output. The supply curve is SS represented by the upward portion of LMC above the minimum of LAC.
2. When the price is less than the minimum of LAC:
Let us suppose that the market price faced by a firm is OP1 which is less than the minimum of LAC. at this price the firm would not produce any output because
producing any output will lead therefore the firm would not produce anything so the supply curve of the firm in the long run for the price less than the minimum of LAC is
given S1S1 and is represented by the darkened vertical part of the price axis.
Combining 1 st and 2 nd stages the firms long run supply curve under perfect competition is given by (S1S1 + SS).
More Questions From Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition
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- Q:-
Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of the good is Rs 10.
Quantity Sold TR MR AR 0
1
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6
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