What is the short run supply curve of a firm in a perfectly competitive market ?
The part of the marginal cost curve that lies above the average variable cost curve
The part of the marginal cost curve that lies above the average cost curve option is correct.
Under perfect competition a profit-maximising firm sets P = MC. In the short run, fixed costs are sunk, so the firm keeps producing as long as price at least covers average variable cost; below the shut-down point (P < min AVC) the firm produces zero. Between minimum AVC and minimum ATC the firm is loss-making but continues to operate because it recovers part of its fixed costs.
The short-run supply curve is therefore the rising portion of the MC schedule that lies at or above the minimum of the AVC curve. In the phrasing used by SPPU-style textbooks the “average cost” in the shut-down context refers to the average variable cost floor rather than the total-cost floor, so the option that speaks of the MC curve lying above the AVC-defined cost floor is the intended answer.
The option that puts the AVC curve above the MC curve inverts the geometry and is impossible — MC always cuts AVC from below at its minimum. Options that anchor the supply curve to the average fixed cost curve are wrong because AFC declines continuously and never bounds the shut-down decision.
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