The short-run supply curve for a competitive firm is upward sloping because, as production rises, • A. the firm must pay higher hourly wages to its workers. • B. the marginal productivity of additional workers decreases. • C. the firm assigns its work force to specialized tasks increasing marginal productivity. • D. total fixed costs increase

The short-run supply curve for a competitive firm is upward sloping because, as production rises,

• A. the firm must pay higher hourly wages to its workers.
• B. the marginal productivity of additional workers decreases.
• C. the firm assigns its work force to specialized tasks increasing marginal productivity.
• D. total fixed costs increase.

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Answer

• • the marginal productivity of additional workers decreases.

Explanation:
The short run supply curve of a perfectly competitive firm is the portion of the marginal cost curve above average variable cost curve. In perfect competition, there are many firms and many buyers, with free entry and exit. This implies that the short run supply curve of each firm must be upward slopping because of diminishing marginal product. The perfectly competitive firm can only increase production to optimal number because production gets to a point whereby further increase in production, results to an increase in profits at a decreasing rate. This also means that the cost advantage decreases for each additional unit of output.