The market for backpacks is perfectly competitive. When a firm produces 4 backpacks a day, its average variable cost is at a minimum of $25 a backpack. On the graph, construct the firm's supply curve. Draw the firm's supply curve when the market price is below $25 a backpack. Label it S0. Now draw the firm's supply curve when the market price is above $25 a backpack. Label it S1.

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In a perfectly competitive market the firms supply curve is determined by its marginal cost MC curve ... View the full answer