In the short-run a firm marginal cost curve above the point of shut-down is its?
Answer Details
In the short-run, a firm's marginal cost curve above the point of shut-down is its supply curve.
The marginal cost curve represents the additional cost of producing one more unit of output. In the short-run, a firm has fixed costs (such as rent, loan payments, and salaries) that cannot be changed, and variable costs (such as raw materials and labor) that can be adjusted to some extent.
If the price of the good or service that the firm produces is higher than the variable cost of producing it, the firm will continue to produce and sell the good or service, even if it is not covering its fixed costs. However, if the price falls below the variable cost, the firm will shut down production in the short-run, because it cannot cover even its variable costs.
In this context, the point of shut-down is the point at which the price of the good or service falls below the minimum average variable cost of production. This means that the firm cannot cover its variable costs and will incur losses.
Therefore, if the marginal cost curve is above the point of shut-down, the firm will continue to produce and supply the good or service as long as the price is above the minimum average variable cost. This region of the marginal cost curve above the point of shut-down is the firm's short-run supply curve.