Assume the market price is greater than average total cost at the perfectly competitive firm's profit-maximizing level of output.In this case,the firm is earning positive economic profits,which act as an incentive for new firms to enter the market.

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If the market price is greater than average total cost, it means that the firm is earning a profit. This profit acts as an incentive for new firms to enter the market, hoping to also earn a profit. The entry of new firms will increase competition and drive down the market price, decreasing the profit of existing firms. Eventually, the market price will be driven down to the point where firms are earning only normal profits (where price equals average total cost), and there will be no further incentive for new firms to enter the market.

Assume the Market Price Is Greater Than Average Total Cost