-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, how much economic profit does the firm make?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms maximize profit by producing where price equals marginal cost (P=MC). Without the specific cost table, we assume the firm has adjusted output to this point. Economic profit is total revenue minus total cost. If the firm's total revenue equals its total cost at the market price of $15, it makes zero economic profit, which is typical in the long run for a perfectly competitive firm.

-Giuseppe's Pizza Is a Perfectly Competitive Firm