Assume a perfectly competitive firm is producing 500 units of output, P = $7, ATC of the 500^thunit is $6, marginal cost of the 500^thunit = $7, and AVC of the 500^thunit = $5. Based on this information, the firm is:

Question

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The firm is earning an economic profit because the price ($7) is greater than the average total cost ($6) for each unit, resulting in a profit of $1 per unit. For 500 units, this results in a total economic profit of $500.

Assume a Perfectly Competitive Firm Is Producing 500 Units of Output