A perfectly competitive firm is producing 1,100 units, which is their profit-maximizing output level. The market price for their good is $4 and the firm's average total cost to produce the 1,100 units is $4 Which of the following is true?

Question

Quizplus · Accepted Answer

If the market price is equal to the average total cost, the firm is earning a competitive return, meaning it is covering all of its costs but not earning an economic profit. Therefore, the firm should not increase its production as it is already producing at the profit-maximizing output level. The firm is also not incurring an economic loss.

A Perfectly Competitive Firm Is Producing 1,100 Units, Which Is