Firms will make a profit in the long run or short run if the price is:

Question

Quizplus · Accepted Answer

If the price is greater than the average total cost (ATC), the firm will make a profit in the long run or short run. This is because the price covers all the costs of production, including fixed costs, and generates a surplus for the firm, resulting in economic profits. If the price is equal to marginal revenue (MR), the firm will maximize its profits, but it may or may not make a profit in the short or long run, depending on the level of costs. If the price is less than the marginal cost (MC), the firm will not produce in the short run, and in the long run, it will exit the market. If the price is less than the average variable cost (AVC), the firm will shut down in the short run, but in the long run, it may re-enter or exit the market, depending on the level of fixed costs.

Firms Will Make a Profit in the Long Run or Short