A firm’s marginal cost curve is a part of its marginal cost curve. Any factor that affects a firm’s marginal cost curve is a determinant of its supply curve. 

Following are the two factors determining a firm’s supply curve:

a. Technological progress: The organisational innovation by the firm leads to more production of output. That means, to produce a given level of output, the organizational innovation allows the firm to use fewer units of inputs. It is expected that this will lower the firm’s marginal cost at any level of output, i.e. there is a rightward shift of the MC curve. As the firm’s supply curve is essentially a segment of the MC curve, technological progress shifts the supply curve of the firm to the right. At any given market price, the firm now supplies more quantity of output.

b. Input prices: A change in the prices of factors of production (inputs) also influences a firm’s supply curve. If the price of input (e.g. wage) increases, the cost of production also increases. The consequent increase in the firm’s average cost at any level of output is usually accompanied by an increase in the firm’s marginal cost at any level of output which leads to upward shift of the MC curve. That means, the firm’s supply curve shifts to the left and the firm produces less quantity of output.