A perfectly competitive firm will earn a positive economic profit so long as price is greater than average total cost at the profit-maximizing level of output.

Question

Quizplus · Accepted Answer

This statement is true according to the profit-maximizing rule in a perfectly competitive market, which states that a firm will produce where marginal cost equals price, and this level of output corresponds to the point where price is greater than average total cost. Therefore, the firm will earn a positive economic profit equal to the difference between price and average total cost at this level of output.

A Perfectly Competitive Firm Will Earn a Positive Economic Profit