If a firm is earning a normal profit, but zero economic profit, at the point where MR = MC, the firm should
A) shut down
B) increase output and decrease price
C) increase output and increase price
D) decrease output and increase price
E) remain at its current level of output

Question

Quizplus · Accepted Answer

When a firm is earning a normal profit but zero economic profit, it means that it is covering all its costs, including opportunity costs. The condition where marginal revenue (MR) equals marginal cost (MC) indicates the firm is operating efficiently and maximizing its profit (even if the economic profit is zero). Therefore, the firm should remain at its current level of output, as any change could lead to inefficiencies or losses.

If a Firm Is Earning a Normal Profit, but Zero