The correct answer is Option 2: MC Curve
Here's why:
- MC Curve (Marginal Cost Curve):
- In a perfectly competitive market, a firm's supply curve is the portion of its marginal cost (MC) curve that lies above its average variable cost (AVC) curve.
- This is because a perfectly competitive firm will produce where price (P) equals marginal cost (MC) to maximize profit.
- The MC curve shows how much the firm is willing to supply at each price, which is the definition of a supply curve.
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