If the price of a product consistently exceeds its average cost,one can definitely conclude that the firm that sells the product:
A)is earning a normal rate of return.
B)is maximizing its long-run profit.
C)is producing at its most efficient level of output.
D)is earning a positive economic profit.
E)is producing at the minimum efficient scale.

Question

Quizplus · Accepted Answer

If the price of a product consistently exceeds its average cost, it means that the firm is making a profit. The profit could be either a normal profit (covering all costs including opportunity cost of capital) or an economic profit (earning more than the opportunity cost of capital). Since the question asks about consistently exceeding average cost, the firm is likely earning economic profit. Therefore, the best choice is D - is earning a positive economic profit.

If the Price of a Product Consistently Exceeds Its Average