the price is greater than the minimum average variable cost. In other words, the marginal cost curve above the

minimum point on the average variable cost curve becomes the firm’s supply curve.

LINK IT UP

Watch this video (http://openstax.org/l/foodprice) that addresses how drought in the United States can impact

food prices across the world.

As we discussed in the chapter on Demand and Supply, many of the reasons that supply curves shift relate to

underlying changes in costs. For example, a lower price of key inputs or new technologies that reduce

production costs cause supply to shift to the right. In contrast, bad weather or added government regulations

can add to costs of certain goods in a way that causes supply to shift to the left. We can also interpret these

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