In the short run, a perfectly competitive firm produces output and earns zero economic profit if:

Question

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In the short run, a perfectly competitive firm produces output and earns zero economic profit when price (P) is equal to average total cost (ATC). At this point, the firm is just covering all of its costs such as labor, capital, and resources, but not earning any additional profits. If the price is higher than ATC, the firm will earn profits, and if the price is lower than average variable cost (AVC), the firm will shut down its operations.

In the Short Run, a Perfectly Competitive Firm Produces Output