Consider a perfectly competitive firm in the short run.Assume that the firm produces the profit-maximizing output and earns economic profits.Which statement is definitely FALSE?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the firm earns economic profits in the short run by producing an output where marginal cost equals marginal revenue. Since the market price is equal to the marginal revenue, it is also equal to the marginal cost. However, the average total cost may not be equal to the price, as the economic profits may be higher or lower than the fixed costs associated with the output. Therefore, statement C is false.

Consider a Perfectly Competitive Firm in the Short Run