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Individual Supply Curve in the Short Run and Long Run definitions

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  • Short Run
    A period during which a firm decides production based on covering variable costs, not all costs.
  • Long Run
    A timeframe where a firm considers all costs and can exit or enter the market freely.
  • Average Variable Cost
    The per-unit expense of variable inputs, crucial for determining production decisions in the short run.
  • Average Total Cost
    The per-unit expense of all inputs, guiding a firm's market participation in the long run.
  • Marginal Cost
    The extra expense incurred from producing one more unit, forming the basis of the supply curve.
  • Supply Curve
    A graphical representation showing quantities a firm offers at various prices, shaped by cost conditions.
  • Perfect Competition
    A market structure where firms are price takers and supply decisions depend on cost curves.
  • Shutdown Point
    The price threshold below which a firm ceases production in the short run due to insufficient variable cost coverage.
  • Exit Point
    The price threshold below which a firm leaves the market in the long run, not covering total costs.
  • Production Quantity
    The amount a firm chooses to produce, determined by where revenue equals marginal cost above cost thresholds.
  • Minimum AVC
    The lowest value of average variable cost, marking the start of the short run supply curve.
  • Minimum ATC
    The lowest value of average total cost, marking the start of the long run supply curve.
  • Marginal Revenue
    The additional income from selling one more unit, used to determine optimal production.
  • Profit
    The surplus earned when price exceeds average total cost, motivating long run production.
  • Cost Curve
    A graphical tool showing how costs change with output, essential for supply decisions.