Assertion: Under perfect competition, any factor that affects a firm’s marginal cost curve is a determinant of its supply curve.
Reasoning: Under perfect competition, a firm’s supply curve is a part of its marginal cost curve.
Answer & explanation
Correct answer: option 1
The correct answer is option 1: Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.
Assertion: Under perfect competition, any factor that affects a firm’s marginal cost curve is a determinant of its supply curve. This is true.
Reasoning: Under perfect competition, a firm’s supply curve is a part of its marginal cost curve. This is true. Under perfect competition, the firm’s supply curve corresponds to the portion of its MC curve that lies above the AVC.
- Since the firm’s supply curve is derived from the MC curve, any factor affecting MC automatically affects supply.
- Therefore, the reasoning correctly supports the assertion.