In the short run,a perfectly competitive firm produces output and earns ZERO economic profit if:

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm produces output where marginal cost (MC) equals price (P). If the price is equal to the average total cost (ATC), then the firm is earning zero economic profit, meaning it is covering all of its costs but not making any extra profit. If the price is less than the ATC, the firm would be incurring losses and if the price is greater than the ATC, the firm would be earning positive economic profit. Therefore, option B is the correct answer.

In the Short Run,a Perfectly Competitive Firm Produces Output and Earns