Industry Supply

From one firm to the whole market

A single competitive firm supplies along its marginal cost curve above minimum average variable cost (below that it shuts down). The short-run industry supply is the horizontal sum of those firm supply curves: at each price, add up what every firm produces.

With \(n\) identical firms, that’s just \[ Q^{S}(p) = n \cdot q^{S}(p), \] where \(q^{S}(p)\) is one firm’s supply. More firms stretches the industry curve to the right — at any price the market makes \(n\) times as much. The curve inherits the firm’s shutdown price (minimum AVC): below it, nobody produces.

The sim reuses the cubic-cost firm from the Cost Curves and Firm Supply modules, with minimum AVC = 1.75 (the shutdown price). A firm’s supply solves \(p = MC(q)\) on the upward branch.

Try it. Change the number of firms and read off industry quantity at any price. Below the dashed shutdown line (p = 1.75) the whole industry produces nothing; above it, output scales up with the firm count.

Number of firms (n): 8 Market price p: 6.0

What to notice

• Industry supply is the firm curve scaled horizontally by n — same shape, same shutdown price, just wider. Doubling the firms doubles output at every price.
• Below the shutdown price (1.75) the curve is vertical at zero — no firm covers its variable cost, so the market supplies nothing.
• In the long run (not shown here) free entry drives price toward minimum ATC and the industry curve becomes nearly flat — firms enter until economic profit is competed away.