Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit.

Question

​Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit.

Quizplus · Accepted Answer

In a perfectly competitive market, when firms produce at the output level where marginal revenue equals marginal cost, they are maximizing their profits, but this does not guarantee an economic profit. They could be breaking even (earning normal profit) or even incurring losses if the market price is below, equal to, or just above average total cost, respectively.

​Whenever Firms in a Perfectly Competitive Market Produce the Output

Whenever Firms in a Perfectly Competitive Market Produce the Output