shifts in the firm’s supply curve as shifts of the marginal cost curve. A shift in costs of production that

increases marginal costs at all levels of output—and shifts MC upward and to the left—will cause a perfectly

competitive firm to produce less at any given market price. Conversely, a shift in costs of production that

decreases marginal costs at all levels of output will shift MC downward and to the right and as a result, a

competitive firm will choose to expand its level of output at any given price. The following Work It Out feature

will walk you through an example.

WORK IT OUT

At What Price Should the Firm Continue Producing in the Short Run?
To determine the short-run economic condition of a firm in perfect competition, follow the steps outlined below.

Use the data in Table 8.7.

Q

P

TFC TVC TC AVC ATC MC TR Profits

0 $28 $20 $0

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1 $28 $20 $20 -

2 $28 $20 $25 -

3 $28 $20 $35 -

4 $28 $20 $52 -

5 $28 $20 $80 -

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