If a perfectly competitive firm is earning the competitive return, then the market price is equal to the firm's average variable cost.

Question

Quizplus · Accepted Answer

When a perfectly competitive firm is earning the competitive return, the market price is equal to the firm's average total cost, not just the average variable cost. This ensures the firm is covering all its costs, including both variable and fixed, and earning a normal profit.

If a Perfectly Competitive Firm Is Earning the Competitive Return