In the short run,if P ATC,a perfectly competitive firm:

Question

In the short run,if P > ATC,a perfectly competitive firm:

Quizplus · Accepted Answer

If P > ATC, then the firm is earning a price greater than its average total cost. This means that they are covering all their costs and still have some profit left over. In a perfectly competitive market, these profits will attract new firms into the market, driving down the price until all firms are earning zero economic profit in the long run. However, in the short run, the firm can earn an economic profit. Therefore, the best answer is B, which states that the firm produces output and earns an economic profit.

In the Short Run,if P > ATC,a Perfectly Competitive Firm