In the short run, a perfectly competitive firm produces output and breaks even if:

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will produce output and break even when it is able to cover all of its costs, including both fixed and variable costs. This occurs when the price of the good is equal to the average total cost (ATC) of producing the good. At this level of output, the firm's total revenue (TR) will be equal to its total cost (TC), resulting in zero economic profit. Therefore, the correct choice is B - the firm produces the quantity at which P = ATC.

In the Short Run, a Perfectly Competitive Firm Produces Output